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 RelationsMaria 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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