Applied Optoelectronics Reports Second Quarter 2018 Results
“We are pleased with our second quarter results, which were driven by increased demand for our market-leading datacenter products. We continue to focus on diversifying our customer base and in the quarter secured seven design wins, including one 100G win with a large datacenter operator in China,” said Dr. Thompson Lin,
Second Quarter 2018 Financial Summary
- Total revenue was
$87.8 million , compared with$117.4 million in the second quarter 2017 and$65.2 million in the first quarter of 2018.
- GAAP gross margin was 38.6%, compared with 45.4% in the second quarter 2017 and 39.6% in the first quarter of 2018. Non-GAAP gross margin was 40.4%, compared with 45.5% in the second quarter 2017 and 40.0% in the first quarter of 2018.
- GAAP net income was
$8.0 million , or$0.40 per diluted share, compared with net income of$29.1 million , or$1.43 per diluted share in the second quarter 2017, and net income of$2.1 million , or$0.11 per diluted share in the first quarter of 2018.
- Non-GAAP net income was
$12.9 million , or$0.64 per diluted share, compared with non-GAAP net income of$31.3 million , or$1.54 per diluted share in the second quarter 2017, and non-GAAP net income of$5.6 million , or$0.28 per diluted share in the first quarter of 2018.
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 2018 Business Outlook (+)
For the third quarter of 2018, the company currently expects:
- Revenue in the range of
$82 million to $92 million . - Non-GAAP gross margin in the range of 40.0% to 41.5%.
- Non-GAAP net income in the range of
$11.1 million to $15.2 million , and non-GAAP fully diluted earnings per share in the range of$0.54 to $0.75 using approximately 20.4 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
Forward-Looking Information
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements reflect the views of management at the time such statements are made. 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: the company's reliance on a small number of customers for a substantial portion of its revenues; reduction in the size or quantity of customer orders; change in demand for the company's products or their rate of deployment of their products; 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; potential pricing pressure; general conditions in the internet datacenter, cable television (CATV) broadband, telecom, or fiber-to-the-home (FTTH) markets; changes in the world economy (particularly in
Non-GAAP Financial Measures
In addition to GAAP reporting, 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 margin, we exclude stock-based compensation expense, non-recurring expenses and expenses associated with discontinued products, if any, from our GAAP gross margin. To arrive at our non-GAAP net income (loss), we exclude all amortization of intangible assets, stock-based compensation expense, non-recurring expenses, unrealized foreign exchange gain (loss), losses from the disposal of idle assets, if any, non-recurring tax expenses (benefits), and expenses associated with discontinued products, if any, from our GAAP net income (loss). Included in our non-recurring expenses in Q2 2018 are certain consulting fees, and employee severance expenses. Non-cash expenses associated with discontinued products in Q2 2018 include depreciation on certain equipment undergoing reconfiguration. Other expenses associated with discontinued products in Q2 2018 include inventory obsolescence charges associated with materials used in the manufacture of these discontinued products.
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, unrealized foreign exchange gain (loss) and non-recurring expenses is appropriate because treatment of these items may vary for reasons unrelated to our overall operating performance;
- We believe that elimination of expenses associated with discontinued products, including depreciation and inventory obsolescence is appropriate because these expenses are not indicative of our ongoing operations;
- 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.
A reconciliation of our GAAP net income (loss) and GAAP earnings per share for the three and six months ended
Non-GAAP measures should not be considered as an alternative to net income (loss), earnings per share, 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 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
Investor Relations Contacts:
+1-415-217-7722
ir@ao-inc.com
| Applied Optoelectronics, Inc. | ||||
| Preliminary Condensed Consolidated Balance Sheets | ||||
| (In thousands, except per share data) | ||||
| (Unaudited) | ||||
| June 30, 2018 | December 31, 2017 | |||
| ASSETS | ||||
| CURRENT ASSETS | ||||
| Cash, Cash Equivalents and Short term investments | $ | 77,943 | $ | 83,984 |
| Accounts Receivable, Net | 48,668 | 59,850 | ||
| Inventories | 93,269 | 75,768 | ||
| Prepaid Income Tax | 638 | 1,394 | ||
| Prepaid Expenses and Other Current Assets | 10,070 | 8,701 | ||
| Total Current Assets | 230,588 | 229,697 | ||
| Property, Plant And Equipment, Net | 212,105 | 197,943 | ||
| Land Use Rights, Net | 6,096 | 804 | ||
| Intangible Assets, Net | 3,978 | 4,007 | ||
| Deferred Income Tax Assets | 13,151 | 12,801 | ||
| Other Assets | 6,286 | 7,732 | ||
| TOTAL ASSETS | $ | 472,204 | $ | 452,984 |
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||
| CURRENT LIABILITIES | ||||
| Accounts Payable | $ | 51,429 | $ | 43,624 |
| Accrued Expenses | 16,651 | 19,103 | ||
| Accrued Income Tax | 464 | 7,422 | ||
| Current Portion of Long Term Debt | 3,161 | 559 | ||
| Total Current Liabilities | 71,705 | 70,708 | ||
| Notes Payable and Long Term Debt | 57,868 | 49,000 | ||
| TOTAL LIABILITIES | 129,573 | 119,708 | ||
| STOCKHOLDERS' EQUITY | ||||
| Total Preferred Stock | - | - | ||
| Common Stock | 20 | 19 | ||
| Additional Paid-in Capital | 288,686 | 285,376 | ||
| Cumulative Translation Adjustment | 5,633 | 9,743 | ||
| Retained Earnings | 48,292 | 38,138 | ||
| TOTAL STOCKHOLDERS' EQUITY | 342,631 | 333,276 | ||
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | 472,204 | $ | 452,984 |
| Applied Optoelectronics, Inc. | |||||||||||||
| Preliminary Condensed Consolidated Statements of Operations | |||||||||||||
| (In thousands, except per share data) | |||||||||||||
| (Unaudited) | |||||||||||||
| Three Months Ended June 30, |
Six Months Ended June 30, |
||||||||||||
| Revenue | 2018 | 2017 | 2018 | 2017 | |||||||||
| Datacenter | $ | 69,040 | $ | 99,298 | $ | 119,623 | $ | 178,892 | |||||
| CATV | 14,184 | 14,404 | 24,752 | 27,498 | |||||||||
| Telecom | 4,157 | 3,077 | 7,743 | 6,248 | |||||||||
| FTTH | 166 | 125 | 277 | 223 | |||||||||
| Other | 275 | 467 | 666 | 734 | |||||||||
| Total Revenue | 87,822 | 117,371 | 153,061 | 213,595 | |||||||||
| Total Cost of Goods Sold | 53,959 | 64,089 | 93,362 | 118,841 | |||||||||
| Total Gross Profit | 33,863 | 53,282 | 59,699 | 94,754 | |||||||||
| Operating Expenses: | |||||||||||||
| Research and Development | 12,645 | 8,073 | 24,381 | 15,505 | |||||||||
| Sales and Marketing | 2,377 | 2,158 | 4,851 | 4,061 | |||||||||
| General and Administrative | 9,898 | 8,786 | 19,354 | 16,608 | |||||||||
| Total Operating Expenses | 24,920 | 19,017 | 48,586 | 36,174 | |||||||||
| Operating Income | 8,943 | 34,265 | 11,113 | 58,580 | |||||||||
| Other Income (Expense): | |||||||||||||
| Interest Income | 85 | 70 | 137 | 105 | |||||||||
| Interest Expense | (279 | ) | (245 | ) | (350 | ) | (544 | ) | |||||
| Other Income | 292 | 192 | 305 | 156 | |||||||||
| Foreign Exchange Gain (Loss) | 1,289 | (128 | ) | 249 | (700 | ) | |||||||
| Total Other Income (Expense): | 1,387 | (111 | ) | 341 | (983 | ) | |||||||
| Net Income before Income Taxes | 10,330 | 34,154 | 11,454 | 57,597 | |||||||||
| Income Tax Expense | (2,296 | ) | (5,083 | ) | (1,300 | ) | (8,737 | ) | |||||
| Net Income | 8,034 | 29,071 | 10,154 | 48,860 | |||||||||
| Net income per share attributable to common stockholders | |||||||||||||
| basic | $ | 0.41 | $ | 1.52 | $ | 0.52 | $ | 2.59 | |||||
| diluted | $ | 0.40 | $ | 1.43 | $ | 0.51 | $ | 2.45 | |||||
| Weighted-average shares used to compute net income per share attributable to common stockholders |
|||||||||||||
| basic | 19,590 | 19,081 | 19,541 | 18,841 | |||||||||
| diluted | 20,080 | 20,367 | 20,012 | 19,956 | |||||||||
| Applied Optoelectronics, Inc. | |||||||||||||
| Reconciliation of Statements of Operations under GAAP and Non-GAAP | |||||||||||||
| (In thousands, except per share data) | |||||||||||||
| (Unaudited) | |||||||||||||
| Three Months Ended June 30, |
Six Months Ended June 30, |
||||||||||||
| 2018 | 2017 | 2018 | 2017 | ||||||||||
| GAAP total gross profit (a) | $ | 33,863 | $ | 53,282 | $ | 59,699 | $ | 94,754 | |||||
| Share-based compensation expense | 211 | 134 | 388 | 212 | |||||||||
| Non-recurring expense | 0 | 0 | 7 | 0 | |||||||||
| Expenses associated with discontinued products | 1,432 | 0 | 1,503 | 0 | |||||||||
| Non-GAAP total gross profit (a) | 35,506 | 53,416 | 61,597 | 94,966 | |||||||||
| GAAP net income | 8,034 | 29,071 | 10,154 | 48,860 | |||||||||
| Amortization of intangible assets | 127 | 120 | 253 | 238 | |||||||||
| Share-based compensation expense | 2,900 | 2,260 | 5,469 | 3,767 | |||||||||
| Non-recurring charges | 330 | 290 | 620 | 390 | |||||||||
| Expenses associated with discontinued products | 1,432 | - | 1,503 | - | |||||||||
| Non-cash expenses associated with discontinued products | 1,004 | - | 1,755 | - | |||||||||
| Loss from disposal of idle assets | - | 2 | - | 2 | |||||||||
| Unrealized exchange loss (gain) | (911 | ) | (101 | ) | (1,114 | ) | 147 | ||||||
| Non recurring tax benefit | (48 | ) | (320 | ) | (162 | ) | (320 | ) | |||||
| Non-GAAP net income | 12,868 | 31,322 | 18,478 | 53,084 | |||||||||
| GAAP diluted net income per share | $ | 0.40 | $ | 1.43 | $ | 0.51 | $ | 2.45 | |||||
| Amortization of intangible assets | 0.01 | 0.01 | 0.01 | 0.01 | |||||||||
| Share-based compensation expense | 0.14 | 0.11 | 0.27 | 0.19 | |||||||||
| Non-recurring charges | 0.02 | 0.01 | 0.03 | 0.02 | |||||||||
| Expenses associated with discontinued products | 0.07 | - | 0.08 | - | |||||||||
| Non-cash expenses associated with discontinued products | 0.05 | - | 0.09 | - | |||||||||
| Loss from disposal of idle assets | - | - | - | - | |||||||||
| Unrealized exchange loss (gain) | (0.05 | ) | (0.00 | ) | (0.06 | ) | 0.01 | ||||||
| Non recurring tax benefit | (0.00 | ) | (0.02 | ) | (0.01 | ) | (0.02 | ) | |||||
| Non-GAAP diluted net income per share | $ | 0.64 | $ | 1.54 | $ | 0.92 | $ | 2.66 | |||||
| Shares used to compute diluted earnings per share | 20,080 | 20,367 | 20,012 | 19,956 | |||||||||
| (a) Provided for the purpose of calculating gross profit as a percentage of revenue (gross margin). | |||||||||||||
Source: Applied Optoelectronics, Inc.