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 2021 ended September 30, 2021.
“Demand trends played out largely as we expected
in the third quarter,” said Dr. Thompson Lin, Applied
Optoelectronics Inc. Founder, President and Chief Executive
Officer. “We are encouraged by the continued strength we are seeing
in our CATV business and the sequential uptick in datacom, as well
as nine design wins across our business in the quarter. As
expected, some component shortages impacted our business in the
third quarter, and this is expected to continue to be a factor in
the fourth quarter, but we believe the demand drivers remain
favorable for us and anticipate easing of these supply constraints
in the future.”
Third Quarter 2021 Financial
Summary
- Total revenue was $53.3 million, compared with $76.6 million in
the third quarter of 2020 and $54.2 million in the second quarter
of 2021.
- GAAP gross margin was 15.3%, compared with 25.0% in the third
quarter of 2020 and 19.9% in the second quarter of 2021. Non-GAAP
gross margin was 19.9%, compared with 27.4% in the third quarter of
2020 and 25.0% in the second quarter of 2021.
- GAAP net loss was $15.8 million, or $0.58 per basic share,
compared with net loss of $9.6 million, or $0.42 per basic share,
in the third quarter of 2020, and a net loss of $8.2 million, or
$0.31 per basic share, in the second quarter of 2021.
- Non-GAAP net loss was $5.3 million, or $0.20 per basic share,
compared with non-GAAP net loss of $1.4 million, or $0.06 per basic
share in the third quarter of 2020, and a non-GAAP net loss of $4.1
million, or $0.15 per basic share in the second quarter of
2021.
A reconciliation between all GAAP and non-GAAP
information referenced above for the third quarters of 2021 and
2020 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 2021 Business
Outlook (+)
For the fourth quarter of 2021, the company
currently expects:
- Revenue in the range of $51 million to $55 million.
- Non-GAAP gross margin in the range of 18.5% to 20.0%.
- Non-GAAP net loss in the range of $5.5 million to $6.6 million,
and non-GAAP loss per share in the range of $0.20 to $0.24 using
approximately 27.4 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 November 4, 2021 to discuss
its third quarter 2021 results and outlook for its fourth quarter
2021 at 4:30 p.m. Eastern time / 3:30 p.m. Central time. Open to
the public, investors may access the call by dialing 844-890-1794
(domestic) or 412-717-9586 (international). 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 877-344-7529
(domestic) or 412-317-0088 (international) and entering passcode
10160446.
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 2021. 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 impact of the COVID-19 pandemic on our business and
financial results; 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, 2020 and our Quarterly Report on Form 10-Q for
the quarter ended September 30, 2021. 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 (income) 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-GAAP 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 2021 and Q3 2020 are certain one-time legal (if any) and
consulting fees (if any) and employee severance expenses (if any).
Also included in our non-recurring (income) expenses in Q3 2020,
but not in 2021, were a one-time customer reimbursement of certain
incurred expenses, and non-recurring government subsidy income in
our Taiwan subsidiary due to COVID-19. In computing our non-GAAP
income tax expense (benefit), we have applied an estimate of our
annual effective income tax rate and applied it to our net income
before income taxes. 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 estimating non-GAAP income taxes allows
comparison with prior periods and provides additional information
regarding the generation of potential future deferred tax
assets;
- 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 the quarter ended September 30,
2021 to our non-GAAP net income (loss) and earnings (loss) per
share is provided below, together with corresponding
reconciliations for the quarter period ended September 30,
2020.
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 Relations Lindsay
Savarese Office: (212) 331-8417 ir@ao-inc.com
Monica Gould
+1-212-871-3927
ir@ao-inc.com
Applied Optoelectronics, Inc. |
Preliminary
Condensed Consolidated Balance Sheets |
(In
thousands) |
(Unaudited) |
|
September 30, 2021 |
|
December 31,
2020 |
|
|
|
ASSETS |
|
|
CURRENT ASSETS |
|
|
Cash, Cash Equivalents and Restricted Cash |
$ |
48,897 |
|
$ |
50,114 |
Accounts Receivable, Net |
|
43,942 |
|
|
43,042 |
Notes receivable |
|
8,505 |
|
|
401 |
Inventories |
|
94,507 |
|
|
110,397 |
Prepaid Income Tax |
|
2 |
|
|
2 |
Prepaid Expenses and Other Current Assets |
|
4,717 |
|
|
5,213 |
Total Current Assets |
|
200,570 |
|
|
209,169 |
|
|
|
Property, Plant And Equipment, Net |
|
242,452 |
|
|
252,984 |
Land Use Rights, Net |
|
5,790 |
|
|
5,854 |
Right of Use Asset |
|
7,342 |
|
|
7,817 |
Intangible Assets, Net |
|
3,877 |
|
|
3,999 |
Other Assets |
|
2,493 |
|
|
982 |
TOTAL ASSETS |
$ |
462,524 |
|
$ |
480,805 |
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY |
|
|
|
|
|
CURRENT LIABILITIES |
|
|
Accounts Payable |
$ |
28,333 |
|
$ |
29,482 |
Accrued Expenses |
|
16,204 |
|
|
18,511 |
Current Lease Liability |
|
1,063 |
|
|
1,030 |
Bank Acceptance Payable |
|
6,481 |
|
|
15,860 |
Current Portion of Notes Payable and Long Term Debt |
|
41,254 |
|
|
38,265 |
Total Current Liabilities |
|
93,335 |
|
|
103,148 |
|
|
|
Notes Payable and Long Term Debt |
|
19,271 |
|
|
13,904 |
Convertible Senior Notes |
|
78,472 |
|
|
77,854 |
Other Long-Term Liabilities |
|
7,478 |
|
|
8,008 |
TOTAL LIABILITIES |
|
198,556 |
|
|
202,914 |
|
|
|
STOCKHOLDERS' EQUITY |
|
|
TOTAL STOCKHOLDERS' EQUITY |
|
263,968 |
|
|
277,891 |
|
|
|
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY |
$ |
462,524 |
|
$ |
480,805 |
|
|
|
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 |
|
2021 |
|
|
2020 |
|
|
|
2021 |
|
|
2020 |
|
Datacenter |
$ |
23,929 |
|
$ |
55,336 |
|
|
$ |
72,259 |
|
$ |
141,133 |
|
CATV |
|
23,101 |
|
|
11,642 |
|
|
|
69,339 |
|
|
22,007 |
|
Telecom |
|
5,148 |
|
|
8,870 |
|
|
|
12,959 |
|
|
17,600 |
|
FTTH |
|
62 |
|
|
67 |
|
|
|
784 |
|
|
69 |
|
Other |
|
1,027 |
|
|
693 |
|
|
|
1,816 |
|
|
1,489 |
|
Total Revenue |
|
53,267 |
|
|
76,608 |
|
|
|
157,157 |
|
|
182,298 |
|
|
|
|
|
|
|
Total Cost of Goods Sold |
|
45,143 |
|
|
57,418 |
|
|
|
127,537 |
|
|
143,034 |
|
|
|
|
|
|
|
Total Gross Profit |
|
8,124 |
|
|
19,190 |
|
|
|
29,620 |
|
|
39,264 |
|
|
|
|
|
|
|
Operating
Expenses: |
|
|
|
|
|
Research and Development |
|
10,149 |
|
|
11,206 |
|
|
|
31,990 |
|
|
32,567 |
|
Sales and Marketing |
|
2,783 |
|
|
4,491 |
|
|
|
8,576 |
|
|
10,858 |
|
General and Administrative |
|
10,645 |
|
|
10,272 |
|
|
|
32,195 |
|
|
31,520 |
|
Total Operating Expenses |
|
23,577 |
|
|
25,969 |
|
|
|
72,761 |
|
|
74,945 |
|
|
|
|
|
|
|
Operating Loss |
|
(15,453 |
) |
|
(6,779 |
) |
|
|
(43,141 |
) |
|
(35,681 |
) |
|
|
|
|
|
|
Other Income
(Expense): |
|
|
|
|
|
Interest Income |
|
17 |
|
|
26 |
|
|
|
49 |
|
|
220 |
|
Interest Expense |
|
(1,359 |
) |
|
(1,480 |
) |
|
|
(4,158 |
) |
|
(4,424 |
) |
Other Income |
|
999 |
|
|
1,137 |
|
|
|
7,411 |
|
|
2,078 |
|
Foreign Exchange Gain (Loss) |
|
(1 |
) |
|
(271 |
) |
|
|
217 |
|
|
18 |
|
Total Other Expense: |
|
(344 |
) |
|
(588 |
) |
|
|
3,519 |
|
|
(2,108 |
) |
|
|
|
|
|
|
Net loss before Income Taxes |
|
(15,797 |
) |
|
(7,367 |
) |
|
|
(39,622 |
) |
|
(37,789 |
) |
|
|
|
|
|
|
Income Tax Expense |
|
- |
|
|
(2,249 |
) |
|
|
- |
|
|
(7,224 |
) |
|
|
|
|
|
|
Net loss |
|
(15,797 |
) |
|
(9,616 |
) |
|
|
(39,622 |
) |
|
(45,013 |
) |
Net loss per
share attributable to common stockholders |
basic |
$ |
(0.58 |
) |
$ |
(0.42 |
) |
|
$ |
(1.48 |
) |
$ |
(2.12 |
) |
diluted |
$ |
(0.58 |
) |
$ |
(0.42 |
) |
|
$ |
(1.48 |
) |
$ |
(2.12 |
) |
|
|
|
|
|
|
Weighted-average shares used to compute net loss per share
attributable to common stockholders |
|
|
|
basic |
|
27,097 |
|
|
22,744 |
|
|
|
26,791 |
|
|
21,276 |
|
diluted |
|
27,097 |
|
|
22,744 |
|
|
|
26,791 |
|
|
21,276 |
|
|
|
|
|
|
|
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, |
|
|
2021 |
|
|
|
2020 |
|
|
|
2021 |
|
|
|
2020 |
|
GAAP total gross profit (a) |
$ |
8,124 |
|
|
$ |
19,190 |
|
|
$ |
29,620 |
|
|
$ |
39,264 |
|
Share-based compensation expense |
|
222 |
|
|
|
229 |
|
|
|
689 |
|
|
|
712 |
|
Non-recurring expense |
|
52 |
|
|
|
- |
|
|
|
88 |
|
|
|
972 |
|
Expenses associated with discontinued products |
|
2,220 |
|
|
|
1,566 |
|
|
|
5,970 |
|
|
|
2,997 |
|
Non-GAAP total gross profit (a) |
|
10,618 |
|
|
|
20,985 |
|
|
|
36,367 |
|
|
|
43,945 |
|
|
|
|
|
|
|
GAAP net loss |
|
(15,797 |
) |
|
|
(9,616 |
) |
|
|
(39,622 |
) |
|
|
(45,013 |
) |
Amortization of intangible assets |
|
146 |
|
|
|
146 |
|
|
|
449 |
|
|
|
431 |
|
Share-based compensation expense |
|
3,130 |
|
|
|
3,265 |
|
|
|
8,922 |
|
|
|
9,804 |
|
Non-recurring (income) expense |
|
17 |
|
|
|
(1,033 |
) |
|
|
(5,727 |
) |
|
|
(227 |
) |
Expenses associated with discontinued products |
|
2,220 |
|
|
|
1,566 |
|
|
|
5,971 |
|
|
|
2,997 |
|
Non-cash expenses associated with discontinued products |
|
1,235 |
|
|
|
495 |
|
|
|
3,662 |
|
|
|
2,704 |
|
Unrealized exchange loss (gain) |
|
331 |
|
|
|
(61 |
) |
|
|
1,041 |
|
|
|
(188 |
) |
Non-GAAP tax benefit |
|
3,427 |
|
|
|
3,819 |
|
|
|
10,365 |
|
|
|
14,297 |
|
Non-GAAP net loss |
|
(5,291 |
) |
|
|
(1,419 |
) |
|
|
(14,939 |
) |
|
|
(15,195 |
) |
|
|
|
|
|
|
GAAP diluted net loss per share |
$ |
(0.58 |
) |
|
$ |
(0.42 |
) |
|
$ |
(1.48 |
) |
|
$ |
(2.12 |
) |
Amortization of intangible assets |
|
0.01 |
|
|
|
0.01 |
|
|
|
0.02 |
|
|
|
0.02 |
|
Share-based compensation expense |
|
0.11 |
|
|
|
0.14 |
|
|
|
0.33 |
|
|
|
0.46 |
|
Non-recurring (income) expense |
|
0.00 |
|
|
|
(0.05 |
) |
|
|
(0.22 |
) |
|
|
(0.01 |
) |
Expenses associated with discontinued products |
|
0.08 |
|
|
|
0.07 |
|
|
|
0.22 |
|
|
|
0.14 |
|
Non-cash expenses associated with discontinued products |
|
0.04 |
|
|
|
0.02 |
|
|
|
0.14 |
|
|
|
0.13 |
|
Unrealized exchange loss (gain) |
|
0.01 |
|
|
|
(0.00 |
) |
|
|
0.04 |
|
|
|
0.00 |
|
Non-GAAP tax benefit |
|
0.13 |
|
|
|
0.17 |
|
|
|
0.39 |
|
|
|
0.67 |
|
Non-GAAP diluted net loss per share |
$ |
(0.20 |
) |
|
$ |
(0.06 |
) |
|
$ |
(0.56 |
) |
|
$ |
(0.71 |
) |
|
|
|
|
|
|
Shares used
to compute diluted loss per share |
|
27,097 |
|
|
|
22,744 |
|
|
|
26,791 |
|
|
|
21,276 |
|
Shares used
to compute diluted earnings per share |
|
27,097 |
|
|
|
22,744 |
|
|
|
26,791 |
|
|
|
21,276 |
|
|
|
|
|
|
|
(a) Provided for the purpose of calculating gross profit as a
percentage of revenue (gross margin). |
|
|
|
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