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 third
quarter ended September 30, 2019.
“We are pleased to report a quarter-to-quarter improvement in
both revenue and bottom line results,” said Dr. Thompson Lin,
Applied Optoelectronics Inc. Founder, President and Chief Executive
Officer. “We secured seven new datacenter design wins this quarter
and we believe that the datacenter market continues to show early
signs of a recovery. We also made good progress on further
diversifying our customer base and reducing our revenue
concentration with a total of eleven design wins in the quarter,
including four from new customers.”
Third Quarter 2019 Financial Summary
- Total revenue was $46.1 million, compared with $56.4 million in
the third quarter of 2018 and $43.4 million in the second quarter
of 2019.
- GAAP gross margin was 26.0%, compared with 31.1% in the third
quarter of 2018 and 24.3% in the second quarter of 2019. Non-GAAP
gross margin was 28.8%, compared with 34.0% in the third quarter of
2018 and 27.2% in the second quarter of 2019.
- GAAP net loss was $8.8 million, or $0.44 per basic share,
compared with net loss of $3.7 million, or $0.19 per basic share in
the third quarter of 2018, and a net loss of $11.4 million, or
$0.57 per basic share in the second quarter of 2019.
- Non-GAAP net loss was $2.9 million, or $0.15 per basic share,
compared with non-GAAP net income of $2.7 million, or $0.14 per
diluted share in the third quarter of 2018, and a non-GAAP net loss
of $5.2 million, or $0.26 per basic share in the second 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.
Fourth Quarter 2019 Business Outlook (+)
For the fourth 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 26.5% to 29.0%.
- Non-GAAP net loss in the range of $4.3 million to $5.9 million,
and non-GAAP loss per share in the range of $0.21 to $0.30 using
approximately 20.1 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 November 6, 2019 to discuss its third quarter 2019
results and outlook for its fourth 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 10135362.
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 fourth 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 Q3 2019 and Q3
2018 are certain one-time legal (if any) and consulting fees (if
any) and employee severance expenses (if any). Also included in our
non-recurring expenses in the nine months ended September 30, 2019,
but not included in our results in Q3 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 Q3 2019 and Q3
2018 include depreciation on certain equipment undergoing
reconfiguration. Other expenses associated with discontinued
products in Q3 2019 and Q3 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, stock-based compensation expense, non-recurring
revenue and expenses, losses from the disposal of idle assets,
unrealized foreign exchange gain or loss, unamortized debt issuance
costs associated with the extinguishment of debt, and depreciation
on certain equipment undergoing reconfiguration 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 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 Q3 2019 to our non-GAAP net income (loss) and
earnings (loss) per share is provided below, together with
corresponding reconciliations for the nine month period ended
September 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 readily determinable 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 RelationsMonica
Gould+1-212-871-3927
ir@ao-inc.com
Lindsay
Savarese+1-212-331-8417
ir@ao-inc.com
Applied Optoelectronics, Inc. |
Preliminary Condensed Consolidated Balance
Sheets |
(In thousands, except per share data) |
(Unaudited) |
|
September 30, 2019 |
December 31, 2018 |
|
|
|
ASSETS |
|
|
CURRENT
ASSETS |
|
|
Cash, Cash Equivalents and Restricted Cash |
$ |
72,376 |
$ |
58,004 |
Accounts Receivable, Net |
|
29,709 |
|
30,534 |
Inventories |
|
82,118 |
|
93,256 |
Prepaid Income Tax |
|
759 |
|
1,188 |
Prepaid Expenses and Other Current Assets |
|
5,685 |
|
11,293 |
Total Current Assets |
|
190,647 |
|
194,275 |
|
|
|
Property, Plant And Equipment, Net |
|
245,535 |
|
234,211 |
Land Use Rights, Net |
|
5,551 |
|
5,814 |
Right of Use Asset |
|
7,738 |
|
- |
Intangible Assets, Net |
|
4,072 |
|
3,977 |
Deferred Income Tax Assets |
|
29,362 |
|
21,714 |
Other Assets |
|
973 |
|
6,849 |
TOTAL ASSETS |
$ |
483,878 |
$ |
466,840 |
|
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY |
|
|
|
|
|
CURRENT
LIABILITIES |
|
|
Accounts Payable |
$ |
28,074 |
$ |
29,910 |
Accrued Expenses |
|
15,542 |
|
19,291 |
Current Lease Liability |
|
924 |
|
- |
Bank Acceptance Payable |
|
4,080 |
|
4,628 |
Current Portion of Notes Payable and Long Term Debt |
|
15,803 |
|
23,589 |
Total Current Liabilities |
|
64,423 |
|
77,418 |
|
|
|
Notes Payable and Long Term Debt |
|
32,373 |
|
60,328 |
Convertible Senior Notes |
|
76,835 |
|
- |
Other Long-Term Liabilities |
|
7,962 |
|
- |
TOTAL LIABILITIES |
|
181,593 |
|
137,746 |
|
|
|
STOCKHOLDERS'
EQUITY |
|
|
TOTAL STOCKHOLDERS' EQUITY |
|
302,285 |
|
329,094 |
|
|
|
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY |
$ |
483,878 |
$ |
466,840 |
|
|
|
Applied Optoelectronics, Inc. |
Preliminary Condensed Consolidated Statements of
Operations |
(In thousands, except per share data) |
(Unaudited) |
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
Revenue |
|
2019 |
|
|
2018 |
|
|
|
2019 |
|
|
2018 |
|
Datacenter |
$ |
34,006 |
|
$ |
38,954 |
|
|
$ |
104,311 |
|
$ |
158,577 |
|
CATV |
|
8,797 |
|
|
14,295 |
|
|
|
30,577 |
|
|
39,047 |
|
Telecom |
|
2,868 |
|
|
2,656 |
|
|
|
6,236 |
|
|
10,399 |
|
FTTH |
|
39 |
|
|
221 |
|
|
|
149 |
|
|
498 |
|
Other |
|
374 |
|
|
260 |
|
|
|
941 |
|
|
926 |
|
Total Revenue |
|
46,084 |
|
|
56,386 |
|
|
|
142,214 |
|
|
209,447 |
|
|
|
|
|
|
|
Total Cost of Goods Sold |
|
34,108 |
|
|
38,849 |
|
|
|
107,349 |
|
|
132,211 |
|
|
|
|
|
|
|
Total Gross Profit |
|
11,976 |
|
|
17,537 |
|
|
|
34,865 |
|
|
77,236 |
|
|
|
|
|
|
|
Operating Expenses: |
|
|
|
|
|
Research and Development |
|
10,466 |
|
|
14,180 |
|
|
|
32,802 |
|
|
38,561 |
|
Sales and Marketing |
|
2,518 |
|
|
2,370 |
|
|
|
7,444 |
|
|
7,221 |
|
General and Administrative |
|
9,988 |
|
|
10,591 |
|
|
|
31,312 |
|
|
29,945 |
|
Total Operating Expenses |
|
22,972 |
|
|
27,141 |
|
|
|
71,558 |
|
|
75,727 |
|
|
|
|
|
|
|
Operating Income (Loss) |
|
(10,996 |
) |
|
(9,604 |
) |
|
|
(36,693 |
) |
|
1,509 |
|
|
|
|
|
|
|
Other Income
(Expense): |
|
|
|
|
|
Interest Income |
|
347 |
|
|
86 |
|
|
|
729 |
|
|
223 |
|
Interest Expense |
|
(1,517 |
) |
|
(274 |
) |
|
|
(4,003 |
) |
|
(624 |
) |
Other Income |
|
1,124 |
|
|
217 |
|
|
|
1,437 |
|
|
522 |
|
Foreign Exchange Gain (Loss) |
|
322 |
|
|
549 |
|
|
|
305 |
|
|
798 |
|
Total Other Income (Expense): |
|
276 |
|
|
578 |
|
|
|
(1,532 |
) |
|
919 |
|
|
|
|
|
|
|
Net Income (loss) before Income Taxes |
|
(10,720 |
) |
|
(9,026 |
) |
|
|
(38,225 |
) |
|
2,428 |
|
|
|
|
|
|
|
Income Tax Benefit (Expense) |
|
1,940 |
|
|
5,294 |
|
|
|
7,605 |
|
|
3,994 |
|
|
|
|
|
|
|
Net Income (loss) |
|
(8,780 |
) |
|
(3,732 |
) |
|
|
(30,620 |
) |
|
6,422 |
|
|
Net
income (loss) per share attributable to common
stockholders |
basic |
$ |
(0.44 |
) |
$ |
(0.19 |
) |
|
$ |
(1.54 |
) |
$ |
0.33 |
|
diluted |
$ |
(0.44 |
) |
$ |
(0.19 |
) |
|
$ |
(1.54 |
) |
$ |
0.32 |
|
|
|
|
|
|
|
Weighted-average shares used to compute net
income (loss) per share attributable to common
stockholders |
|
|
|
basic |
|
20,023 |
|
|
19,707 |
|
|
|
19,940 |
|
|
19,597 |
|
diluted |
|
20,023 |
|
|
19,707 |
|
|
|
19,940 |
|
|
20,039 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Applied Optoelectronics, Inc. |
Reconciliation of Statements of Operations under GAAP and
Non-GAAP |
(In thousands, except per share data) |
(Unaudited) |
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
|
2019 |
|
|
2018 |
|
|
|
2019 |
|
|
2018 |
|
GAAP total gross profit (a) |
$ |
11,976 |
|
$ |
17,537 |
|
|
$ |
34,865 |
|
$ |
77,236 |
|
Share-based compensation expense |
|
197 |
|
|
205 |
|
|
|
585 |
|
|
593 |
|
Non-recurring expense |
|
- |
|
|
- |
|
|
|
- |
|
|
7 |
|
Expenses associated with discontinued products |
|
1,117 |
|
|
1,412 |
|
|
|
3,109 |
|
|
2,915 |
|
Non-GAAP total gross profit (a) |
|
13,290 |
|
|
19,154 |
|
|
|
38,559 |
|
|
80,751 |
|
|
|
|
|
|
|
GAAP net income (loss) |
|
(8,780 |
) |
|
(3,732 |
) |
|
|
(30,620 |
) |
|
6,422 |
|
Amortization of intangible assets |
|
137 |
|
|
125 |
|
|
|
400 |
|
|
378 |
|
Share-based compensation expense |
|
2,978 |
|
|
2,894 |
|
|
|
8,941 |
|
|
8,363 |
|
Non-recurring charges |
|
568 |
|
|
685 |
|
|
|
1,622 |
|
|
1,305 |
|
Expenses associated with discontinued products |
|
1,117 |
|
|
1,412 |
|
|
|
3,109 |
|
|
2,915 |
|
Non-cash expenses associated with discontinued products |
|
1,114 |
|
|
859 |
|
|
|
3,247 |
|
|
2,614 |
|
Unrealized exchange loss (gain) |
|
(65 |
) |
|
506 |
|
|
|
(236 |
) |
|
(608 |
) |
Non-recurring tax benefit |
|
- |
|
|
0 |
|
|
|
- |
|
|
(162 |
) |
Non-GAAP net income (loss) |
|
(2,931 |
) |
|
2,749 |
|
|
|
(13,537 |
) |
|
21,227 |
|
|
|
|
|
|
|
GAAP diluted net income (loss) per share |
$ |
(0.44 |
) |
$ |
(0.19 |
) |
|
$ |
(1.54 |
) |
$ |
0.32 |
|
Amortization of intangible assets |
|
0.01 |
|
|
0.01 |
|
|
|
0.02 |
|
|
0.02 |
|
Share-based compensation expense |
|
0.15 |
|
|
0.14 |
|
|
|
0.45 |
|
|
0.42 |
|
Non-recurring charges |
|
0.03 |
|
|
0.03 |
|
|
|
0.08 |
|
|
0.07 |
|
Expenses associated with discontinued products |
|
0.06 |
|
|
0.07 |
|
|
|
0.16 |
|
|
0.15 |
|
Non-cash expenses associated with discontinued products |
|
0.05 |
|
|
0.04 |
|
|
|
0.16 |
|
|
0.13 |
|
Loss from disposal of idle assets |
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
Unrealized exchange loss (gain) |
|
(0.01 |
) |
|
0.04 |
|
|
|
(0.01 |
) |
|
(0.04 |
) |
Non-recurring tax benefit |
|
- |
|
|
- |
|
|
|
- |
|
|
(0.01 |
) |
Non-GAAP diluted net income (loss) per share |
$ |
(0.15 |
) |
$ |
0.14 |
|
|
$ |
(0.68 |
) |
$ |
1.06 |
|
|
|
|
|
|
|
Shares used to compute
diluted loss per share |
|
20,023 |
|
|
19,707 |
|
|
|
19,940 |
|
|
19,597 |
|
Shares used to compute
diluted earnings per share |
|
20,023 |
|
|
20,185 |
|
|
|
19,940 |
|
|
20,039 |
|
|
|
|
|
|
|
(a) Provided for
the purpose of calculating gross profit as a percentage of revenue
(gross margin). |
|
|
|
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