• Applied Optoelectronics Reports Second Quarter 2023 Results

    Source: Nasdaq GlobeNewswire / 03 Aug 2023 15:10:00   America/Chicago

    SUGAR LAND, Texas, Aug. 03, 2023 (GLOBE NEWSWIRE) -- Applied Optoelectronics, Inc. (NASDAQ: AAOI), a leading provider of fiber-optic access network products for the cable broadband, internet datacenter, telecom and fiber-to-the-home (FTTH) markets, today announced financial results for its second quarter 2023 ended June 30, 2023.

    “Our second quarter revenue was in-line with our expectations, and we are pleased to report non-GAAP gross margin and non-GAAP EPS above our expectations.” said Dr. Thompson Lin, Applied Optoelectronics Inc. Founder, President and Chief Executive Officer. “Favorable product mix combined with our cost reduction efforts, and the benefit of some of the intentional actions we have taken to improve our cost structure led to a strong improvement in our gross margin, which is a trend we expect will continue. We are thrilled with the increased demand we saw for our 100G and 400G datacenter products. Total revenue for our 400G products doubled sequentially and accounted for 11% of our total datacenter revenue in Q2, and we believe revenue from our 400G products will continue to grow this year based on the anticipated initial deliveries under the recently-announced deal with Microsoft. Lastly, we made progress in strengthening our newly formed broadband access group with the addition of considerable talent to the team, and believe we are well positioned to execute on our new strategy to sell our CATV products directly to MSO customers.”

    Second Quarter 2023 Financial Summary

    • GAAP revenue was $41.6 million, compared $52.3 million in the second quarter of 2022 and $53.0 million in the first quarter of 2023.
    • GAAP gross margin was 19.0%, compared with 16.5% in the second quarter of 2022 and 17.4% in the first quarter of 2023. Non-GAAP gross margin was 24.8%, compared with 16.7% in the second quarter of 2022 and 23.2% in the first quarter of 2023.
    • GAAP net loss was $16.9 million, or $0.57 per basic share, compared with net loss of $14.5 million, or $0.52 per basic share in the second quarter of 2022, and a net loss of $16.3 million, or $0.56 per basic share in the first quarter of 2023.
    • Non-GAAP net loss was $6.1 million, or $0.21 per basic share, compared with non-GAAP net loss of $7.6 million, or $0.28 per basic share in the second quarter of 2022, and a non-GAAP net loss of $7.1million, or $0.25 per basic share in the first quarter of 2023.

    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 2023 Business Outlook (+)

    For the third quarter of 2023, the company currently expects:

    • Revenue in the range of $60 million to $66 million.
    • Non-GAAP gross margin in the range of 29.5% to 31%.
    • Non-GAAP net profit in the range of a loss of $1.9 million to profit of $0.2 million, and non-GAAP earnings per share in the range of a loss of $0.06 to earnings of $0.01 using approximately 33.1 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 August 3, 2023 to discuss its second quarter 2023 results and outlook for its third quarter of 2023 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 1076424.

    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 2023. 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, 2022. 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 loss (gain), losses from the disposal of idle assets, if any, non-GAAP tax benefit (expenses), and expenses associated with discontinued products, from our GAAP net income (loss). Included in our non-recurring expenses in Q2 2023 and Q2 2022, and Q1 2023, are certain non-recurring expenses related to extreme weather and pandemic events (if any) and non-recurring tax expenses or benefits (if any), and employee severance expenses (if any). In computing our non-GAAP income tax benefit (expense), 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 diluted net loss per share is calculated by dividing our non-GAAP net loss 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, 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 Q2 2023 to our non-GAAP net income (loss) and earnings (loss) per share is provided below, together with corresponding reconciliations for Q2 2022. A reconciliation of our GAAP net income (loss) and GAAP earnings (loss) per share for Q1 2023 to our non-GAAP net income (loss) and earnings (loss) per share was provided in our Q1 2023 earnings release.

    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 CATV broadband, internet datacenter, 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
    +1-212-331-8417
    ir@ao-inc.com

    Cassidy Fuller
    +1-415-217-4968                
    ir@ao-inc.com

     Applied Optoelectronics, Inc.
     Preliminary Condensed Consolidated Balance Sheets
     (In thousands)
     (Unaudited)
      June 30, 2023December 31, 2022
        
     ASSETS  
     CURRENT ASSETS  
     Cash, Cash Equivalents and Restricted Cash$28,612 $35,587 
     Accounts Receivable, Net 42,598  61,175 
     Notes receivable 782  339 
     Inventories 66,321  79,679 
     Prepaid Income Tax 2  - 
     Prepaid Expenses and Other Current Assets 6,231  6,384 
     Total Current Assets 144,546  183,164 
        
     Property, Plant And Equipment, Net 197,879  210,184 
     Land Use Rights, Net 4,990  5,238 
     Operating Right of Use Asset 5,296  5,566 
     Financing Right of Use Asset 10  26 
     Intangible Assets, Net 3,625  3,699 
     Other Assets 531  386 
     TOTAL ASSETS$356,877 $408,263 
        
     LIABILITIES AND STOCKHOLDERS' EQUITY  
        
     CURRENT LIABILITIES  
     Accounts Payable$35,111 $47,845 
     Bank Acceptance Payable 8,637  12,337 
     Accrued Expenses 14,702  17,222 
     Deferred Revenue 10,720  3,000 
     Current Lease Liability-Operating 1,055  1,041 
     Current Lease Liability-Financing 53  63 
     Current Portion of Notes Payable and Long Term Debt 37,276  57,074 
     Current Portion of Convertible Debt 79,916  - 
     Total Current Liabilities 187,470  138,582 
        
     Deferred Revenue, net of current portion 1,000  - 
     Convertible Senior Notes -  79,506 
     Other Long-Term Liabilities 5,148  5,505 
     TOTAL LIABILITIES 193,618  223,593 
        
     STOCKHOLDERS' EQUITY  
     Total Preferred Stock  
     Common Stock 32  29 
     Additional Paid-in Capital 407,003  391,526 
     Cumulative Translation Adjustment (1,470) 2,183 
     Retained Earnings (242,306) (209,068)
     TOTAL STOCKHOLDERS' EQUITY 163,259  184,670 
        
     TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY$356,877 $408,263 
        


    Applied Optoelectronics, Inc.
    Preliminary Condensed Consolidated Statements of Operations
    (In thousands, except per share data)
    (Unaudited)
    Q2 2023Three Months Ended
    June 30,
     Six Months Ended
    June 30,
    Revenue 2023  2022   2023  2022 
    CATV 9,343  23,713  $37,123 $48,694 
    Datacenter 27,571  21,497   47,924  42,911 
    Telecom 4,231  6,276   7,938  11,541 
    FTTH 55  27   57  124 
    Other 415  786   1,603  1,270 
    Total Revenue 41,615  52,299   94,645  104,540 
          
    Total Cost of Goods Sold 33,717  43,671   77,503  86,888 
          
    Total Gross Profit 7,898  8,628   17,142  17,652 
          
    Operating Expenses:     
    Research and Development 8,640  8,328   17,176  17,814 
    Sales and Marketing 2,269  2,164   4,596  4,722 
    General and Administrative 12,954  11,035   25,502  22,254 
    Total Operating Expenses 23,863  21,527   47,274  44,790 
          
    Operating Loss (15,965) (12,899)  (30,132) (27,138)
          
    Other Income (Expense):     
    Interest Income 37  31   70  59 
    Interest Expense (2,175) (1,408)  (4,312) (2,810)
    Other Income (Expense), net 1,167  (180)  1,145  (629)
    Total Other Income (Expense): (971) (1,557)  (3,097) (3,380)
          
    Net loss before Income Taxes (16,936) (14,456)  (33,229) (30,518)
          
    Income Tax Expense (8) -   (8) - 
          
    Net loss$(16,944)$(14,456) $(33,237)$(30,518)
    Net loss per share attributable to common stockholders
    basic$(0.57)$(0.52) $(1.14)$(1.11)
    diluted$(0.57)$(0.52) $(1.14)$(1.11)
          
    Weighted-average shares used to computenet loss per share attributable tocommon stockholders   
    basic 29,489  27,612   29,182  27,537 
    diluted 29,489  27,612   29,182  27,537 
          


     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,
      2023  2022   2023  2022 
    GAAP revenue$41,615 $52,299  $94,645 $104,540 
    Non-recurring customer credit -  -   -  - 
    Non-GAAP revenue$41,615 $52,299  $94,645 $104,540 
          
    GAAP total gross profit (a)$7,898 $8,628  $17,142 $17,652 
    Share-based compensation expense 156  114   270  250 
    Non-recurring expense -  -   -  1 
    Expenses associated with discontinued products 2,254  -   5,216  - 
    Non-GAAP total gross profit (a)$10,308 $8,742  $22,628 $17,903 
          
    GAAP net loss$(16,944)$(14,456) $(33,237)$(30,518)
    Share-based compensation expense 3,062  2,144   5,352  4,616 
    Expenses associated with discontinued products 2,254  -   5,216  - 
    Non-cash expenses associated with discontinued products 1,148  1,103   2,311  2,269 
    Amortization of intangible assets 162  153   321  304 
    Non-recurring (income) expense 602  9   960  34 
    Unrealized exchange loss (gain) (66) 298   (1,175) 1,279 
    Non-GAAP tax benefit 3,710  3,151   7,037  6,545 
    Non-GAAP net loss$(6,072)$(7,598) $(13,216)$(15,470)
          
    GAAP diluted net loss per share$(0.57)$(0.52) $(1.14)$(1.11)
    Share-based compensation expense 0.10  0.08   0.19  0.17 
    Expenses associated with discontinued products 0.08  -   0.18  - 
    Non-cash expenses associated with discontinued products 0.04  0.03   0.08  0.08 
    Amortization of intangible assets 0.01  0.01   0.01  0.01 
    Non-recurring (income) expense 0.02  0.00   0.03  0.00 
    Unrealized exchange loss (gain) (0.01) 0.01   (0.04) 0.05 
    Non-GAAP tax benefit 0.12  0.11   0.24  0.24 
    Non-GAAP diluted net loss per share$(0.21)$(0.28) $(0.45)$(0.56)
          
    Shares used to compute diluted loss per share 29,489  27,612   29,182  27,537 
    Shares used to compute diluted earnings per share 29,489  27,612   29,182  27,537 
          
    (a) Provided for the purpose of calculating gross profit as a percentage of revenue (gross margin).   

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