AAOI Applied Optoelectronics Inc.

Applied Optoelectronics Reports Third Quarter 2024 Results

Applied Optoelectronics Reports Third Quarter 2024 Results

SUGAR LAND, Texas, Nov. 07, 2024 (GLOBE NEWSWIRE) -- 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, 2024.

“We had a solid third quarter performance as we ramped up production capacity to meet our customers’ rollout schedules,” said Dr. Thompson Lin, Applied Optoelectronics Inc. Founder, President and Chief Executive Officer. “We recorded double digit sequential growth in our data center business, driven by new wins for our 400G products, while our CATV business more than tripled from the second quarter as our customers actively transition to new architectures. Looking ahead, we are optimistic about the long-term demand drivers for both our datacenter and CATV businesses and believe we have the right team, product portfolio, and strategy in place to meet our customers’ needs.”

“Our revenue and gross margin for the third quarter were in-line with our expectations, but our non-GAAP loss per share was larger than we expected, which was primarily due to accelerated R&D spending due to greater than anticipated new customer requests, especially in our data center business where we saw notable interest in our 1.6 Terabit transceivers,” said Dr. Stefan Murry, Applied Optoelectronics Chief Financial Officer and Chief Strategy Officer. “We are carefully managing our balance sheet as we execute on our plans which anticipate a sustained period of growth in both our datacenter and CATV businesses.”

Third Quarter 2024 Financial Summary

  • GAAP revenue was $65.2 million, compared with $62.5 million in the third quarter of 2023 and $43.3 million in the second quarter of 2024.



  • GAAP gross margin was 24.4%, compared with 32.3% in the third quarter of 2023 and 22.1% in the second quarter of 2024. Non-GAAP gross margin was 25.0%, compared with 32.5% in the third quarter of 2023 and 22.5% in the second quarter of 2024.



  • GAAP net loss was $17.8 million, or $0.42 per basic share, compared with net loss of $9.0 million, or $0.27 per basic share in the third quarter of 2023, and a net loss of $26.1 million, or $0.66 per basic share in the second quarter of 2024.



  • Non-GAAP net loss was $8.8 million, or $ 0.21 per basic share, compared with non-GAAP net loss of $1.7 million, or $0.05 per basic share in the third quarter of 2023, and a non-GAAP net loss of $10.9 million, or $0.28 per basic share in the second quarter of 2024.

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 2024 Business Outlook (+)

For fourth quarter of 2024, the company currently expects:

  • Revenue in the range of $94 million to $104 million.
  • Non-GAAP gross margin in the range of 27.5% to 29.5%.
  • Non-GAAP net income in the range of a loss of $1.9 million to income of $1.7 million, and non-GAAP income per share in the range of a loss of $0.04 to earnings of $0.04 using approximately 46 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 today, November 7, 2024 to discuss its third quarter 2024 financial results and outlook for its fourth quarter 2024 at 4:30 p.m. Eastern time / 3:30 p.m. Central time. This call will be open to the public, and 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 . 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 6590897.

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 2024. 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; the impact of the COVID-19 pandemic on our business and financial results; 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, 2023 and our Quarterly Report on Form 10-Q for the quarter ended September 30, 2024. 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 and related expenses, 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 losses from the disposal of idle assets, if any, from our GAAP net income (loss). Included in our non-recurring expenses in Q3 2023 and Q3 2024 are employee severance expenses (if any), legal expenses associated with litigation and certain legal and advisory expenses associated with purchase termination or patent protection (if any), also included in our non-recurring income (expenses) in Q3 2024, but not in Q3 2023, are certain non-recurring expenses related to extreme weather events. 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 adjusted EBITDA is calculated by excluding depreciation expense, non-GAAP tax benefit (expense), and interest (income) expense, as well as the items excluded from non-GAAP net income (loss), from our GAAP net loss. 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), GAAP total gross profit, GAAP earnings (loss), and GAAP earnings (loss) per share for Q3 2024 and the first three quarters of 2024 to our non-GAAP net income (loss), non-GAAP total gross profit, Adjusted EBITDA, and earnings (loss) per share, respectively, is provided below, together with corresponding reconciliations for Q3 2023 and the first three quarters of 2023.

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 .

Investor Relations Contacts:

The Blueshirt Group, Investor Relations

Monica Gould



Cassidy Fuller

                

   
 Applied Optoelectronics, Inc.

Preliminary Condensed Consolidated Balance Sheets

(In thousands)

(Unaudited)

   
 September 30,

2024
  December 31,

2023
 
ASSETS     
CURRENT ASSETS     
Cash, Cash Equivalents and Restricted Cash$41,367  $55,097 
Accounts Receivable, Net75,154  48,071 
Notes Receivable47  219 
Inventories64,382  63,866 
Prepaid Income Tax4  3 
Prepaid Expenses and Other Current Assets7,409  5,349 
Total Current Assets                                188,363                           172,605 
      
Property, Plant And Equipment, Net205,303  200,317 
Land Use Rights, Net4,993  5,030 
Operating Right of Use Asset4,102  5,026 
Intangible Assets, Net3,663  3,628 
Other Assets3,548  2,580 
TOTAL ASSETS$                              409,972  $                       389,186 
      
LIABILITIES AND STOCKHOLDERS' EQUITY     
CURRENT LIABILITIES     
Accounts Payable$55,991  $32,892 
Bank Acceptance Payable9,934  15,482 
Accrued Expenses19,140  18,549 
Deferred Revenue1,439  1,803 
Current Lease Liability-Operating1,115  1,149 
Current Portion of Notes Payable and Long Term Debt29,483  23,197 
Current Portion of Convertible Debt  286 
Total Current Liabilities                                117,102                             93,358 
Convertible Senior Notes77,053  76,233 
Other Long-Term Liabilities3,731  4,726 
TOTAL LIABILITIES                                197,886                           174,317 
      
STOCKHOLDERS' EQUITY     
Common Stock45  38 
Additional Paid-in Capital543,492  478,972 
Cumulative Translation Adjustment709  975 
Retained Earnings(332,160) (265,116)
TOTAL STOCKHOLDERS' EQUITY                                212,086                           214,869 
      
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY$                              409,972  $                       389,186 
      



     
Applied Optoelectronics, Inc.

Preliminary Condensed Consolidated Statements of Operations

(In thousands)

(Unaudited)
     
 Three Months Ended

September 30,
  Nine Months Ended

September 30,
Revenue2024  2023  2024  2023

 
Datacenter$40,945  $48,807  $104,283  $96,731 
CATV20,947  10,268  35,501  47,391 
Telecom2,798  3,074  7,445  11,013 
FTTH  -    57 
Other461  398  1,865  2,001 
Total Revenue65,151  62,547  149,094  157,193 
            
Total Cost of Goods Sold49,234  42,373  116,023  119,876 
           
Total Gross Profit15,917  20,174  33,071  37,317 
           
Operating Expenses:          
Research and Development13,428  9,457  38,218  26,633 
Sales and Marketing4,796  3,035  14,503  7,631 
General and Administrative14,240  14,368  44,786  39,870 
Total Operating Expenses32,464  26,860  97,507  74,134 
           
Operating Loss (16,547  (6,686  (64,436 (36,817)
           
Other Income (Expense):          
Interest Income156  65  509  133 
Interest Expense (1,702)  (1,989)  (5,072) (6,301)
Other Income (Expense), net336   (343) 1,957  803 
Total Other Income (Expense): (1,210)  (2,267)  (2,606) (5,365)
           
Net loss before Income Taxes (17,757)   (8,953)   (67,042)  (42,182)
Income Tax Expense  -    (8)
           
Net loss$(17,757) $(8,953) $(67,042) $(42,190)
Net loss per share attributable to common stockholders 
basic $(0.42) $(0.27) $(1.68) $(1.39)
diluted $(0.42) $(0.27) $(1.68) $(1.39)
           
Weighted-average shares used to compute net loss per share attributable to common stockholders 
basic 42,312  32,774  40,021  30,392 
diluted 42,312  32,774  40,021  30,392 
           



       
Applied Optoelectronics, Inc.

Reconciliation of Statements of Operations under GAAP and Non-GAAP

(In thousands)

(Unaudited)
       
 Three Months Ended

September 30,


  Nine Months Ended

September 30,


 
 2024  2023  2024  2023 
GAAP revenue$                  65,151  $                  62,547  $                149,094  $                157,193 
Non-recurring customer credit                             -                                 -                                 -                                 -   
Non-GAAP revenue$                  65,151  $                  62,547  $                149,094  $                157,193 
            
GAAP total gross profit (a)$                  15,917  $                  20,174  $                  33,071  $                  37,317 
Share-based compensation expense116  124  355  393 
Non-recurring expense29                               -    66                               -   
Expenses associated with discontinued products                          202  29                            202  5,245 
Non-GAAP total gross profit (a)$                  16,264  $                  20,327  $                  33,694  $                  42,955 
            
GAAP net loss$                (17,757) $                  (8,953) $                (67,042) $                (42,190)
Share-based compensation expense2,943  3,235  11,841  8,587 
Expenses associated with discontinued products                          202  29                            202  5,245 
Non-cash expenses associated with discontinued products1,074  864  3,163  3,175 
Amortization of intangible assets102  167  332  489 
Non-recurring (income) expense409  1,344  2,507  2,303 
Unrealized exchange loss (gain)(260 423  16  -752 
Tax (benefit) expense related to the above4,505  1,200  17,311  8,237 
Non-GAAP net loss$                  (8,782) $                  (1,691) $                (31,670) $                (14,906)
            
GAAP net loss$                (17,757) $                  (8,953) $                (67,042) $                (42,190)
Share-based compensation expense2,943  3,235  11,841  8,587 
Expenses associated with discontinued products                          202  29                            202                         5,245 
Non-cash expenses associated with discontinued products1,074  864  3,163  3,175 
Amortization of intangible assets102  167  332  489 
Non-recurring expense (income)409  1,344  2,507  2,303 
Unrealized exchange loss (gain)(260 423  16  -752 
Tax (benefit) expense related to the above                             -                                 -                                 -                                  8 
Depreciation expense4,055  3,946  11,798  11,836 
Interest (income) expense, net1,547  1,925  4,563  6,167 
Adjusted EBITDA$                  (7,685) $                    2,980  $                (32,620) $                  (5,132)
            
GAAP diluted net loss per share$                     (0.42) $                     (0.27) $                     (1.68) $                     (1.39)
Share-based compensation expense0.07  0.10                           0.30                           0.28 
Expenses associated with discontinued products                             -                                 -                             0.01                           0.17 
Non-cash expenses associated with discontinued products0.03  0.03                           0.08                           0.10 
Amortization of intangible assets                             -    0.01                           0.01                           0.02 
Non-recurring (income) expense                         0.01                           0.04                           0.06                           0.08 
Unrealized exchange loss (gain)                       (0.01) 0.01                           0.00                         (0.02)
Non-GAAP tax benefit0.11  0.03                           0.43                           0.27 
Non-GAAP diluted net loss per share$                     (0.21) $                     (0.05) $                (0.79) $                       (0.49)
            
 Shares used to compute diluted loss per share  42,312  32,774  40,021  30,392 
 Shares used to compute diluted earnings per share  42,312  32,774  40,021  30,392 
            
(a) Provided for the purpose of calculating gross profit as a percentage of revenue (gross margin).  


EN
07/11/2024

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