Exhibit 99.1

 

 

 

Applied Optoelectronics Reports Third Quarter 2015 Results

 

 

Sugar Land, Texas, November 5, 2015 – 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.

·

on-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.

 

Investor Relations Contacts:

 

The Blueshirt Group, Investor Relations

Maria Riley

+1-415-217-7722

ir@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,
		2015				2014				2015				2014
Revenue
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,
		2015				2014				2015				2014
Revenue
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