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Applied Optoelectronics Reports Third Quarter 2015 Results

SUGAR LAND, Texas, Nov. 5, 2015 (GLOBE NEWSWIRE) -- Applied Optoelectronics, Inc. (NASDAQ:AAOI), a leading provider of fiber-optic access network products for the internet datacenter, cable broadband and fiber-to-the-home markets, today announced financial results for its third quarter ended September 30, 2015.

"We achieved record revenue that exceeded the high end of our guidance for the third quarter. Our strong topline results were driven by accelerated shipments for our 40G datacenter products, partially offset by lower than expected revenue for our CATV products," said Dr. Thompson Lin, Applied Optoelectronics, Inc. (AOI) Founder and CEO.

"Revenue for our datacenter products grew 30% sequentially and 92% year-over-year, bringing our year-to-date growth to 71%, which is well above our initial annual target. Looking into the fourth quarter, given the accelerated datacenter demand in the third quarter and consolidation activities in CATV, we expect revenue to decline sequentially and to return to more normalized order patterns in the first quarter of 2016."

Lin continued, "We believe AOI is very well positioned to continue to grow from the move to advanced optics in the datacenter as 40G deployments continue and the transition to 100G is just beginning. AOI was recently awarded two 100G design wins from two hyperscale datacenter customers. Leveraging our vertically integrated manufacturing model to internally source key components such as 25G laser diodes and 100G light engines helped enable us to rapidly bring 100G transceivers to market," continued Lin.

Third Quarter 2015 Financial Summary

  • Total revenue grew to $57.1 million, up 56% compared with $36.5 million in the third quarter 2014 and up 15% compared with $49.6 million in the second quarter 2015.
  • GAAP gross margin was 31.6%, compared with 33.2% in the third quarter 2014 and 33.7% in the second quarter 2015. Non-GAAP gross margin was 31.7%, compared with 33.3% in the third quarter 2014 and 33.7% in the second quarter 2015.
  • GAAP net income was $2.7 million or $0.16 per diluted share, compared with net income of $1.6 million or $0.10 per diluted share in the third quarter 2014 and net income of $6.1 million or $0.38 per diluted share in the second quarter 2015.
  • Non-GAAP net income was $6.7 million or $0.40 per diluted share, compared with non-GAAP net income of $3.1 million or $0.20 per diluted share in the third quarter 2014 and non-GAAP net income of $6.1 million or $0.38 per diluted share in the second quarter 2015.
  • On September 30, 2015, cash, cash equivalents, short-term investments and restricted cash totaled $50.1 million, compared with the June 30, 2015 balance of $44.3 million.

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 2015 Business Outlook (+)

For the fourth quarter of 2015, the company currently expects:

  • Revenue in the range of $49.0 million to $52.0 million
  • Non-GAAP gross margin in the range of 33.5% to 34.5%
  • Non-GAAP net income in the range of $4.9 million to $5.9 million, and non-GAAP fully diluted earnings per share in the range of $0.28 to $0.33 using approximately 17.7 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

Applied Optoelectronics will host a conference call today, November 5, 2015 at 4:30 p.m. Eastern time / 3:30 p.m. Central time for analysts and investors to discuss its third quarter results and outlook for its fourth quarter of 2015. Open to the public, investors may access the call by dialing (412) 317-6789. 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 two hours after the call and will run for five business days and may be accessed by dialing (412) 317-0088 and entering passcode 10074185.

Forward-Looking Information

This press release contains forward-looking statements. 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, CATV or FTTH markets; changes in the world economy (particularly in the United States and China); 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. 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. In some cases, you can identify forward-looking statements by terminology such "believe," "may," "estimate," "continue," "anticipate," "intend," "should," "could," "would," "target," "seek," "aim," "believe," "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. 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 operating income (loss), non-GAAP net income (loss), non-GAAP earnings per share, and other non-GAAP measures like Adjusted EBITDA to eliminate the impact of items that we do not consider indicative of our overall operating performance. To arrive at our non-GAAP gross profit, we exclude stock-based compensation expense and non-recurring expenses, if any, from our GAAP gross profit. To arrive at our non-GAAP income (loss) from operations, we exclude all amortization of intangible assets, stock-based compensation expense and non-recurring expenses, if any, from our GAAP net income (loss) from operations. Included in our non-recurring expenses for the periods from 4Q14 to 3Q15 are items related to the relocation of our Taiwan plant. To arrive at Adjusted EBITDA, we exclude these same items and, additionally, exclude asset impairment charges, loss (gain) from disposal of idle assets, unrealized exchange loss (gain), interest (income) expense, on a net basis, provision for (benefit from) income taxes and depreciation expense, from our GAAP net income (loss). 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, non-recurring expenses, amortization and tax is appropriate because treatment of these items may vary for reasons unrelated to our overall operating performance;
  • 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 to evaluate our overall operating performance.

Adjusted EBITDA and other non-GAAP measures should not be considered as an alternative to gross profit, income (loss) from operations, net income (loss) or any other measure of financial performance calculated and presented in accordance with GAAP. Our Adjusted EBITDA and other non-GAAP measures may not be comparable to similarly titled measures of other organizations because other organizations may not calculate Adjusted EBITDA or 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 and fiber-to-the-home markets. AOI supplies optical networking lasers, components and equipment to tier-1 customers in all three 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.

Applied Optoelectronics, Inc.
Preliminary Condensed Consolidated Balance Sheets
(In thousands, except per share data)
(Unaudited)
September 30, 2015 December 31, 2014
ASSETS
CURRENT ASSETS
Cash, Cash Equivalents and Short term investments $ 49,107 $ 40,873
Accounts Receivable, Net 41,069 31,589
Inventories 60,237 33,780
Notes Receivable -- 980
Other Receivables 3,426 1,659
Prepaid Expenses and Other Current Assets 6,355 4,358
Total Current Assets 160,194 113,239
Cash restricted for Construction in Progress 953 --
Property, Plant And Equipment, Net 87,836 64,808
Land Use Rights, Net 877 930
Intangible Assets, net 3,858 3,833
Other Assets 3,231 860
TOTAL ASSETS $ 256,949 $ 183,670
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable $ 31,518 $ 30,799
Accrued Expenses 9,941 6,940
Banker's Acceptance Payable 3,109 1,271
Bank Loan-Short Term 17,561 8,205
Current Portion of Long Term Debt 3,232 1,386
Total Current Liabilities 65,361 48,601
Notes Payable and Long Term Debt 28,436 19,057
Other Long Term Liability 250 1,000
TOTAL LIABILITIES 94,047 68,658
STOCKHOLDERS' EQUITY
TOTAL STOCKHOLDERS' EQUITY 162,902 115,012
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 256,949 $ 183,670
Applied Optoelectronics, Inc.
Preliminary Condensed Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)
Three Months Ended
Sept 30,
Nine Months Ended
Sept 30,
Revenue 2015 2014 2015 2014
CATV $ 14,233 $ 12,246 $ 42,675 $ 32,640
Datacenter 38,591 20,056 84,517 49,530
FTTH 962 2,616 2,371 7,928
Other 3,299 1,631 7,388 3,960
Total Revenue 57,085 36,549 136,951 94,058
Total Cost of Goods Sold 39,032 24,403 92,116 62,071
Total Gross Profit 18,053 12,146 44,835 31,987
Operating Expenses:
Research & Development 5,386 4,194 14,892 11,749
Sales and Marketing 1,582 1,622 4,748 4,452
General and administrative 4,963 4,458 14,500 11,964
Total Operating Expenses 11,931 10,274 34,140 28,165
Operating Income 6,122 1,872 10,695 3,822
Other Income (Expense):
Interest Income 82 95 236 280
Interest Expense (351) (55) (776) (277)
Other Income (Expense) 20 (38) 217 94
Foreign Exchange Gain (Loss) (2,767) (220) (1,717) (151)
Total Other Income (Expenses): (3,016) (218) (2,040) (54)
Net Income before Income Taxes 3,106 1,654 8,655 3,768
Income Tax (406) (77) (541) (187)
Net Income 2,700 1,577 8,114 3,581
Net income per share attributable to common stockholders
basic $ 0.17 $ 0.11 $ 0.53 $ 0.25
diluted $ 0.16 $ 0.10 $ 0.50 $ 0.24
Weighted-average shares used to compute
net income per share attributable to
common stockholders
basic 15,869 14,806 15,220 14,135
diluted 16,694 15,595 16,185 14,950
Applied Optoelectronics, Inc.
Preliminary Condensed Consolidated NON GAAP Statements of Operations
(In thousands, except per share data)
(Unaudited)
Three Months Ended
Sept 30,
Nine Months Ended
Sept 30,
Revenue 2015 2014 2015 2014
CATV $ 14,233 $ 12,246 $ 42,675 $ 32,640
Datacenter 38,591 20,056 84,517 49,530
FTTH 962 2,616 2,371 7,928
Other 3,299 1,631 7,388 3,960
Total Revenue 57,085 36,549 136,951 94,058
Total Cost of Goods Sold 38,970 24,396 92,019 62,009
Total Gross Profit 18,115 12,153 44,932 32,049
Operating Expenses:
Research & Development 5,331 4,165 14,726 11,665
Sales and Marketing 1,524 1,598 4,586 4,380
General and administrative 4,335 3,164 12,435 9,657
Total Operating Expenses 11,190 8,927 31,747 25,702
Operating Income 6,925 3,226 13,185 6,347
Other Income (Expense):
Interest Income 82 95 236 280
Interest Expense (351) (55) (776) (277)
Other Income (Expense) 20 (38) 370 94
Foreign Exchange Gain (Loss) 393 (17) 551 54
Total Other Income (Expenses): 144 (15) 381 151
Net Income before Income Taxes 7,069 3,211 13,566 6,498
Income Tax (406) (77) (541) (187)
Net Income 6,663 3,134 13,025 6,311
Net income per share attributable to common stockholders
basic $ 0.42 $ 0.21 $ 0.86 $ 0.45
diluted $ 0.40 $ 0.20 $ 0.80 $ 0.42
Weighted-average shares used to compute
net income per share attributable to
common stockholders
basic 15,869 14,806 15,220 14,135
diluted 16,694 15,595 16,185 14,950
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,
2015 2014 2015 2014
GAAP total gross profit $ 18,053 $ 12,146 $ 44,835 $ 31,987
Share-based compensation expense 17 7 52 62
Non Recurring expense 45 0 45 0
Non-GAAP income from gross profit 18,115 12,153 44,932 32,049
GAAP research and development expense 5,386 4,194 14,892 11,749
Share-based compensation expense 55 29 166 84
Non-GAAP research and development expense 5,331 4,165 14,726 11,665
GAAP sales and marketing expense 1,582 1,622 4,748 4,452
Share-based compensation expense 58 24 162 72
Non-GAAP sales and marketing expense 1,524 1,598 4,586 4,380
GAAP general and administrative expense 4,964 4,458 14,500 11,964
Share-based compensation expense 387 427 1,188 1,276
Amortization expense 104 94 305 258
Non Recurring expense 137 773 572 773
Non-GAAP general and administrative expense 4,335 3,164 12,435 9,657
GAAP total operating expense 11,931 10,274 34,140 28,165
Share-based compensation expense 500 480 1,516 1,432
Amortization expense 104 94 305 258
Non Recurring expense 137 773 572 773
Non-GAAP total operating expense 11,190 8,927 31,747 25,702
GAAP operating income 6,122 1,872 10,695 3,822
Share-based compensation expense 517 487 1,568 1,494
Amortization expense 104 94 305 258
Non Recurring expense 182 773 617 773
Non-GAAP operating income 6,925 3,226 13,185 6,347
GAAP other income (loss) (3,016) (218) (2,040) (54)
Unrealized exchange loss 3,160 203 2,268 205
Non Recurring expense 0 0 153 0
Non-GAAP other income (loss) 144 (15) 381 151
GAAP net income 2,700 1,577 8,114 3,581
Amortization of intangible assets 104 94 305 258
Share-based compensation expense 517 487 1,568 1,494
Non Recurring charges 182 773 770 773
Unrealized exchange loss 3,160 203 2,268 205
Non-GAAP net income 6,663 3,134 13,025 6,311
GAAP net income 2,700 1,577 8,114 3,581
Amortization of intangible assets 104 94 305 258
Share-based compensation expense 517 487 1,568 1,494
Depreciation expense 2,317 1,585 6,428 4,091
Non Recurring charges 182 773 770 773
Unrealized exchange loss 3,160 203 2,268 205
Interest (income) expense, net 269 (40) 540 (4)
Taxes related to the above 406 77 541 187
Adjusted EBITDA $ 9,655 $ 4,756 $ 20,534 $ 10,585

CONTACT: Investor Relations Contacts: The Blueshirt Group, Investor Relations Maria Riley +1-415-217-7722 ir@ao-inc.com

Source:Applied Optoelectronics, Inc.