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CST: 13/12/2019 21:31:33   

Applied Optoelectronics Reports Second Quarter 2019 Results

128 Days ago

SUGAR LAND, Texas, Aug. 07, 2019 (GLOBE NEWSWIRE) -- Applied Optoelectronics, Inc. (NASDAQ: AAOI), a leading provider of fiber-optic access network products for the internet datacenter, cable broadband, telecom and fiber-to-the-home (FTTH) markets, today announced financial results for its second quarter ended June 30, 2019.

“We are pleased with our execution in the quarter as we delivered revenue within our guidance range and achieved better than expected bottom-line results,” said Dr. Thompson Lin, Applied Optoelectronics Inc. founder and CEO. “The datacenter demand environment remained consistent with our expectations and we secured five new datacenter design wins. We continue to have good technical engagement with both existing and new customers and are encouraged by the positive response to our innovations.”

Second Quarter 2019 Financial Summary

  • Total revenue was $43.4 million, compared with $87.8 million in the second quarter of 2018 and $52.7 million in the first quarter of 2019.
     
  • GAAP gross margin was 24.3%, compared with 38.6% in the second quarter of 2018 and 23.4% in the first quarter of 2019. Non-GAAP gross margin was 27.2%, compared with 40.4% in the second quarter of 2018 and 25.5% in the first quarter of 2019.
     
  • GAAP net loss was $11.4 million, or $0.57 per basic share, compared with net income of $8.0 million, or $0.40 per diluted share in the second quarter of 2018, and a net loss of $10.5 million, or $0.53 per basic share in the first quarter of 2019.
     
  • Non-GAAP net loss was $5.2 million, or $0.26 per basic share, compared with non-GAAP net income of $12.9 million, or $0.64 per diluted share in the second quarter of 2018, and a non-GAAP net loss of $5.4 million, or $0.27 per basic share in the first quarter of 2019.

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 2019 Business Outlook (+)

For the third quarter of 2019, the company currently expects:

  • Revenue in the range of $46 million to $49 million.
  • Non-GAAP gross margin in the range of 27% to 29%.
  • Non-GAAP net loss in the range of $4.2 million to $5.7 million, and non-GAAP loss per share in the range of $0.21 to $0.28 using approximately 20.0 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

The company will host a conference call and webcast for analysts and investors on August 7, 2019 to discuss its second quarter 2019 results and outlook for its third quarter 2019 at 4:30 p.m. Eastern time / 3:30 p.m. Central time. Open to the public, investors may access the call by dialing (412) 717-9586. 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 10133532.

Forward-Looking Information

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. 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," "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. These statements include management’s beliefs and expectations related to our outlook for the third quarter of 2019. 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: 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, cable television (CATV) broadband, telecom, or fiber-to-the-home (FTTH) markets; changes in the world economy (particularly in the United States and China); changes in the regulation and taxation of international trade, including the imposition of tariffs; changes in currency exchange rates; 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, including our Annual Report on Form 10-K for the year ended December 31, 2018. 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. 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 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, expenses associated with discontinued products, and non-recurring expenses, 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 2019 and Q2 2018 are certain legal and consulting fees (if any) and employee severance expenses (if any). Also included in our non-recurring expenses in the six months ended June 30, 2019, but not included in our results in Q2 2019 or in the corresponding periods during the prior year, was the unamortized debt issuance costs associated with the extinguishment of certain debt. Non-cash expenses associated with discontinued products in Q2 2019 and Q2 2018 include depreciation on certain equipment undergoing reconfiguration. Other expenses associated with discontinued products in Q2 2019 and 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 (for periods in which non-GAAP net income is positive) or basic share count (for periods in which our non-GAAP net income is negative). 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 amortization of intangible assets, unrealized foreign exchange gain or loss, stock-based compensation expense and non-recurring revenue and expenses are 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 as a supplement to GAAP measures to evaluate our overall operating performance.

A reconciliation of our GAAP net income (loss) and GAAP earnings (loss) per share for Q2 2019 to our non-GAAP net income (loss) and earnings (loss) per share is provided below, together with corresponding reconciliations for the three month period ended June 30, 2019.

Non-GAAP measures should not be considered as an alternative to net income (loss), earnings (loss) 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 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, telecom and FTTH markets. AOI supplies optical networking lasers, components and equipment to tier-1 customers in all four 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

Investor Relations Contacts:

The Blueshirt Group, Investor Relations
Maria Riley
+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, 2019 December 31, 2018
     
ASSETS    
CURRENT ASSETS    
Cash, Cash Equivalents and Restricted Cash $   83,987 $   58,004
Accounts Receivable, Net     28,406     30,534
Notes receivable     136     - 
Inventories     81,475     93,256
Prepaid Income Tax     1,312     1,188
Prepaid Expenses and Other Current Assets     5,719     11,293
Total Current Assets     201,035     194,275
     
Property, Plant And Equipment, Net     247,887     234,211
Land Use Rights, Net     5,743     5,814
Right of Use Asset     7,912     - 
Intangible Assets, Net     4,028     3,977
Deferred Income Tax Assets     27,437     21,714
Other Assets     1,080     6,849
TOTAL ASSETS $   495,122 $   466,840
     
LIABILITIES AND STOCKHOLDERS' EQUITY    
     
CURRENT LIABILITIES    
Accounts Payable $   31,526 $   29,910
Accrued Expenses     13,986     19,291
Current Lease Liability     903     - 
Bank Acceptance Payable     2,532     4,628
Current Portion of Notes Payable and Long Term Debt     19,180     23,589
Total Current Liabilities     68,127     77,418
     
Notes Payable and Long Term Debt     30,468     60,328
Convertible Senior Notes     76,630     - 
Other Long-Term Liabilities     8,182     - 
TOTAL LIABILITIES     183,407     137,746
     
STOCKHOLDERS' EQUITY    
TOTAL STOCKHOLDERS' EQUITY     311,715     329,094
     
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $   495,122 $   466,840
         


 
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   2019     2018       2019     2018  
 Datacenter $   31,806   $   69,040     $   70,305   $   119,623  
 CATV   9,818     14,184       21,780     24,752  
 Telecom   1,630     4,157       3,368     7,743  
 FTTH   16     166       110     277  
 Other   141     275       567     666  
Total Revenue   43,411     87,822       96,130     153,061  
           
Total Cost of Goods Sold   32,873     53,959       73,241     93,362  
           
Total Gross Profit   10,538     33,863       22,889     59,699  
           
 Operating Expenses:          
 Research and Development   11,151     12,645       22,336     24,381  
 Sales and Marketing   2,331     2,377       4,926     4,851  
 General and Administrative   10,884     9,898       21,324     19,354  
Total Operating Expenses   24,366     24,920       48,586     48,586  
           
Operating Income (Loss)   (13,828 )   8,943       (25,697 )   11,113  
           
 Other Income (Expense):          
 Interest Income   310     85       382     137  
 Interest Expense   (1,490 )   (279 )     (2,486 )   (350 )
 Other Income    235     292       313     305  
 Foreign Exchange Gain (Loss)   216     1,289       (17 )   249  
Total Other Income (Expense):   (729 )   1,387       (1,808 )   341  
           
Net Income (loss) before Income Taxes   (14,557 )   10,330       (27,505 )   11,454  
           
Income Tax Benefit (Expense)   3,191     (2,296 )     5,665     (1,300 )
           
Net Income (loss)   (11,366 )   8,034       (21,840 )   10,154  
 Net income (loss) per share attributable to common stockholders
 basic $   (0.57 ) $   0.41     $   (1.10 ) $   0.52  
 diluted $   (0.57 ) $   0.40     $   (1.10 ) $   0.51  
           
 Weighted-average shares used to compute
  net income (loss) per share attributable to
  common stockholders
     
 basic   19,932     19,590       19,898     19,541  
 diluted   19,932     20,080       19,898     20,012  
                           


 
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,
    2019     2018       2019     2018  
GAAP total gross profit (a) $    10,538   $   33,863     $   22,889   $   59,699  
Share-based compensation expense   199     211       388     388  
Non-recurring expense     -         -          -      7  
Expenses associated with discontinued products   1,067     1,432       1,992     1,503  
Non-GAAP total gross profit (a)   11,804     35,506       25,269     61,597  
           
GAAP net income (loss)   (11,366 )   8,034       (21,840 )   10,154  
Amortization of intangible assets   133     127       263     253  
Share-based compensation expense   3,020     2,900       5,963     5,469  
Non-recurring charges   812     330       1,054     620  
Expenses associated with discontinued products   1,067     1,432       1,992     1,503  
Non-cash expenses associated with discontinued products   1,116     1,004       2,133     1,755  
Unrealized exchange loss (gain)   56     (911 )     (171 )   (1,114 )
Non-recurring tax benefit     -      (48 )       -      (162 )
Non-GAAP net income (loss)   (5,162 )   12,868       (10,606 )   18,478  
           
GAAP diluted net income (loss) per share $   (0.57 ) $   0.40     $   (1.10 ) $   0.51  
Amortization of intangible assets     0.01       0.01         0.01       0.01  
Share-based compensation expense     0.15       0.14         0.30       0.27  
Non-recurring charges     0.04       0.02         0.05       0.03  
Expenses associated with discontinued products     0.05       0.07         0.10       0.08  
Non-cash expenses associated with discontinued products     0.06       0.05         0.11       0.09  
Loss from disposal of idle assets     -        -          -        -   
Unrealized exchange loss (gain)      0.00        (0.05 )       (0.01 )     (0.06 )
Non-recurring tax benefit     -         (0.00 )       -         (0.01 )
Non-GAAP diluted net income (loss) per share $    (0.26 ) $   0.64     $   (0.53 ) $   0.92  
           
 Shares used to compute diluted loss per share    19,932     19,590       19,898     19,541  
 Shares used to compute diluted earnings per share    19,932     20,080       19,898     20,012  
           
(a) Provided for the purpose of calculating gross profit as a percentage of revenue (gross margin).      
       

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