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 first
quarter ended March 31, 2019.
“We achieved revenue in the first quarter of $52.7 million,
which was in-line with our guidance. During the quarter, we
continued to make progress on our efforts to diversify our customer
base, develop innovative optical products and expand the reach of
our products into new markets, such as 5G. We secured a total of
six new design wins that include three wins with customers outside
of our core hyperscale customer base,” said Dr. Thompson Lin,
Applied Optoelectronics Inc. founder and CEO. “In the datacenter
market, we continue to see headwinds as hyperscale customers work
through excess inventory, which is reflected in our second quarter
outlook. However, we continue to have good technical
engagement with both existing and new datacenter customers and are
encouraged by the positive response to our innovations.”
First Quarter 2019 Financial Summary
- Total revenue was $52.7 million, compared with $65.2 million in
the first quarter of 2018 and $58.0 million in the fourth quarter
of 2018.
- GAAP gross margin was 23.4%, compared with 39.6% in the first
quarter of 2018 and 18.2% in the fourth quarter of 2018. Non-GAAP
gross margin was 25.5%, compared with 40.0% in the first quarter of
2018 and 24.7% in the fourth quarter of 2018.
- GAAP net loss was $10.5 million, or $0.53 per basic share,
compared with net income of $2.1 million, or $0.11 per diluted
share in the first quarter of 2018, and a net loss of $8.6 million,
or $0.43 per basic share in the fourth quarter of 2018.
- Non-GAAP net loss was $5.4 million, or $0.27 per basic share,
compared with non-GAAP net income of $5.6 million, or $0.28 per
diluted share in the first quarter of 2018, and a non-GAAP net loss
of $0.5 million, or $0.02 per basic share in the fourth 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.
Second Quarter 2019 Business Outlook (+)
For the second quarter of 2019, the company currently
expects:
- Revenue in the range of $40 million to $45 million.
- Non-GAAP gross margin in the range of 25% to 27%.
- Non-GAAP net loss in the range of $6.9 million to $8.6 million,
and non-GAAP loss per share in the range of $0.35 to $0.43 using
approximately 19.9 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 May 8, 2019 to discuss its first quarter 2019
results and outlook for its second 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 10129541.
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 the expansion of the reach of our products into new
markets and customer responses to our innovations, as well as our
outlook for the second 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 Q1 2019 and Q1
2018 are certain legal and consulting fees (if any) and employee
severance expenses (if any). Also included in our non-recurring
expenses in Q1 2019, but not Q1 2018, was the unamortized debt
issuance costs associated with the extinguishment of certain debt.
Non-cash expenses associated with discontinued products in Q1 2019
and Q1 2018 include depreciation on certain equipment undergoing
reconfiguration. Other expenses associated with discontinued
products in Q1 2019 and Q1 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 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 Q1 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
March 31, 2018.
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 RelationsMaria Riley & Chelsea
Lish+1-415-217-7722
ir@ao-inc.com
|
Applied Optoelectronics,
Inc. |
Preliminary Condensed Consolidated Balance
Sheets |
(In thousands, except per share data) |
(Unaudited) |
|
March 31, 2019 |
December 31, 2018 |
ASSETS |
|
|
CURRENT
ASSETS |
|
|
Cash, Cash Equivalents and Restricted Cash |
$ |
77,459 |
$ |
58,004 |
Accounts Receivable, Net |
|
32,123 |
|
30,534 |
Notes receivable |
|
79 |
|
- |
Inventories |
|
84,464 |
|
93,256 |
Prepaid Income Tax |
|
1,423 |
|
1,188 |
Prepaid Expenses and Other Current Assets |
|
7,726 |
|
11,293 |
Total Current Assets |
|
203,274 |
|
194,275 |
|
|
|
Property, Plant And Equipment, Net |
|
242,623 |
|
234,211 |
Land Use Rights, Net |
|
5,894 |
|
5,814 |
Right of Use Asset |
|
8,293 |
|
- |
Intangible Assets, Net |
|
4,001 |
|
3,977 |
Deferred Income Tax Assets |
|
24,188 |
|
21,714 |
Other Assets |
|
2,932 |
|
6,849 |
TOTAL ASSETS |
$ |
491,205 |
$ |
466,840 |
|
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY |
|
|
|
|
|
CURRENT
LIABILITIES |
|
|
Accounts Payable |
$ |
28,332 |
$ |
29,910 |
Accrued Expenses |
|
12,424 |
|
19,291 |
Current Lease Liability |
|
1,053 |
|
- |
Bank Acceptance Payable |
|
5,198 |
|
4,628 |
Bank Loan-Short Term |
|
13,842 |
|
15,458 |
Current Portion of Long Term Debt |
|
4,326 |
|
8,131 |
Total Current Liabilities |
|
65,175 |
|
77,418 |
|
|
|
Notes Payable and Long Term Debt |
|
17,535 |
|
60,328 |
Convertible Senior Notes |
|
76,439 |
|
- |
Other Long-Term Liabilities |
|
8,438 |
|
- |
TOTAL LIABILITIES |
|
167,587 |
|
137,746 |
|
|
|
STOCKHOLDERS'
EQUITY |
|
|
TOTAL STOCKHOLDERS' EQUITY |
|
323,618 |
|
329,094 |
|
|
|
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY |
$ |
491,205 |
$ |
466,840 |
|
|
|
Applied Optoelectronics, Inc. |
Preliminary Condensed Consolidated Statements of
Operations |
(In thousands, except per share data) |
(Unaudited) |
|
Three Months Ended March 31, |
Revenue |
|
2019 |
|
|
2018 |
|
Datacenter |
$ |
38,499 |
|
$ |
50,583 |
|
CATV |
|
11,962 |
|
|
10,568 |
|
Telecom |
|
1,738 |
|
|
3,586 |
|
FTTH |
|
94 |
|
|
111 |
|
Other |
|
426 |
|
|
391 |
|
Total Revenue |
|
52,719 |
|
|
65,239 |
|
|
|
|
Total Cost of Goods Sold |
|
40,368 |
|
|
39,403 |
|
|
|
|
Total Gross Profit |
|
12,351 |
|
|
25,836 |
|
|
|
|
Operating
Expenses: |
|
|
Research and Development |
|
11,185 |
|
|
11,736 |
|
Sales and Marketing |
|
2,595 |
|
|
2,474 |
|
General and Administrative |
|
10,440 |
|
|
9,456 |
|
Total Operating Expenses |
|
24,220 |
|
|
23,666 |
|
|
|
|
Operating Income (Loss) |
|
(11,869 |
) |
|
2,170 |
|
|
|
|
Other Income
(Expense): |
|
|
Interest Income |
|
72 |
|
|
52 |
|
Interest Expense |
|
(996 |
) |
|
(71 |
) |
Other Income |
|
78 |
|
|
13 |
|
Foreign Exchange Gain (Loss) |
|
(233 |
) |
|
(1,040 |
) |
Total Other Income (Expense): |
|
(1,079 |
) |
|
(1,046 |
) |
|
|
|
Net Income (loss) before Income Taxes |
|
(12,948 |
) |
|
1,124 |
|
|
|
|
Income Tax Benefit (Expense) |
|
2,474 |
|
|
996 |
|
|
|
|
Net Income (loss) |
|
(10,474 |
) |
|
2,120 |
|
Net
income (loss) per share attributable to common
stockholders |
basic |
$ |
(0.53 |
) |
$ |
0.11 |
|
diluted |
$ |
(0.53 |
) |
$ |
0.11 |
|
|
|
|
Weighted-average shares used to compute net income
(loss) per share attributable to common stockholders |
basic |
|
19,863 |
|
|
19,492 |
|
diluted |
|
19,863 |
|
|
19,989 |
|
|
Applied Optoelectronics, Inc. |
Reconciliation of Statements of Operations under GAAP and
Non-GAAP |
(In thousands, except per share data) |
(Unaudited) |
|
Three Months Ended March 31, |
|
|
2019 |
|
|
2018 |
|
GAAP total gross profit (a) |
$ |
12,351 |
|
$ |
25,836 |
|
Share-based compensation expense |
|
189 |
|
|
177 |
|
Non-recurring expense |
|
0 |
|
|
71 |
|
Expenses associated with discontinued products |
|
925 |
|
|
7 |
|
Non-GAAP total gross profit (a) |
|
13,465 |
|
|
26,091 |
|
|
|
|
GAAP net income (loss) |
|
(10,474 |
) |
|
2,120 |
|
Amortization of intangible assets |
|
130 |
|
|
126 |
|
Share-based compensation expense |
|
2,943 |
|
|
2,569 |
|
Non-recurring charges |
|
242 |
|
|
290 |
|
Expenses associated with discontinued products |
|
925 |
|
|
71 |
|
Non-cash expenses associated with discontinued products |
|
1,017 |
|
|
751 |
|
Unrealized exchange loss (gain) |
|
(227 |
) |
|
(203 |
) |
Non-recurring tax benefit |
|
- |
|
|
(114 |
) |
Non-GAAP net income (loss) |
|
(5,444 |
) |
|
5,610 |
|
|
|
|
GAAP diluted net income (loss) per share |
$ |
(0.53 |
) |
$ |
0.11 |
|
Amortization of intangible assets |
|
0.01 |
|
|
0.01 |
|
Share-based compensation expense |
|
0.15 |
|
|
0.13 |
|
Non-recurring charges |
|
0.01 |
|
|
0.01 |
|
Expenses associated with discontinued products |
|
0.05 |
|
|
0.00 |
|
Non-cash expenses associated with discontinued products |
|
0.05 |
|
|
0.04 |
|
Unrealized exchange loss (gain) |
|
(0.01 |
) |
|
(0.01 |
) |
Non-recurring tax benefit |
|
0 |
|
|
(0.01 |
) |
Non-GAAP diluted net income (loss) per share |
$ |
(0.27 |
) |
$ |
0.28 |
|
|
|
|
Shares used to compute
diluted loss per share |
|
19,863 |
|
|
19,492 |
|
Shares used to compute
diluted earnings per share |
|
19,863 |
|
|
19,989 |
|
|
|
|
(a) Provided for
the purpose of calculating gross profit as a percentage of revenue
(gross margin). |
|
|
|
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