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Applied Optoelectronics Reports Second Quarter 2021 Results

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SUGAR LAND, Texas, Aug. 05, 2021 (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 second quarter 2021 ended June 30, 2021.

“We are pleased with the continued strength we are seeing in our CATV product sales, which recorded significant year over year and sequential growth to become our largest product type in the second quarter,” said Dr. Thompson Lin, Applied Optoelectronics Inc. Founder, President and Chief Executive Officer. “While we continue to see softness in the datacenter market as we expected, we are delighted to report that we secured two design wins for our 400G products during the second quarter, and expect that increased contribution from our 400G products will drive a recovery in our datacenter business.”

Second Quarter 2021 Financial Summary

  • GAAP revenue was $54.2 million, compared with $65.2 million in the second quarter of 2020 and $49.7 million in the first quarter of 2021.

  • GAAP gross margin was 19.9%, compared with 21.1% in the second quarter of 2020 and 21.6% in the first quarter of 2021. Non-GAAP gross margin was 25.0%, compared with 23.1% in the second quarter of 2020 and 24.6% in the first quarter of 2021.

  • GAAP net loss was $8.2 million, or $0.31 per basic share, compared with net loss of $18.6 million, or $0.89 per basic share in the second quarter of 2020, and a net loss of $15.6 million, or $0.59 per basic share in the first quarter of 2021.

  • Non-GAAP net loss was $4.1 million, or $0.15 per basic share, compared with non-GAAP net loss of $5.0 million, or $0.24 per basic share in the second quarter of 2020, and a non-GAAP net loss of $5.5 million, or $0.21 per basic share in the first quarter of 2021.

A reconciliation between all GAAP and non-GAAP information referenced above for the second 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.

Third Quarter 2021 Business Outlook (+)

For the third quarter of 2021, the company currently expects:

  • Revenue in the range of $ 51 million to $ 56 million.

  • Non-GAAP gross margin in the range of 19.5% to 21.5%.

  • Non-GAAP net loss in the range of $ 6.9 million to $ 9 million, and non-GAAP loss per share in the range of $0.25 to $0.33 using approximately 27.7 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

The company will host a conference call and webcast for analysts and investors on August 5, 2021 to discuss its second quarter 2021 results and outlook for its third 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 10157944.

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 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 June 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 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), expenses associated with discontinued products, if any, and the effects of forgiveness of our PPP loan from our GAAP net income (loss). Included in our non-recurring expenses in Q2 2021 and Q2 2020 are certain one-time legal (if any) and consulting fees (if any) and employee severance expenses (if any). 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, expenses and other income, 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 June 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 June 30, 2020. A reconciliation of our GAAP net income (loss) and GAAP earnings (loss) per share for the quarter ended June 30, 2021 to our non-GAAP net income (loss) and earnings (loss) per share is provided in our earnings release dated August 5, 2021, which was filed with the Securities and Exchange Commission with a Current Report on Form 8-K filed on August 5, 2021.

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
Monica Gould
+1-212-871-3927
ir@ao-inc.com

Applied Optoelectronics, Inc.

Preliminary Condensed Consolidated Balance Sheets

(In thousands)

(Unaudited)

June 30, 2021

December 31, 2020

ASSETS

CURRENT ASSETS

Cash, Cash Equivalents and Restricted Cash

$

50,499

$

50,114

Accounts Receivable, Net

48,404

43,042

Notes receivable

3,819

401

Inventories

100,399

110,397

Prepaid Income Tax

2

2

Prepaid Expenses and Other Current Assets

5,101

5,213

Total Current Assets

208,224

209,169

Property, Plant And Equipment, Net

246,797

252,984

Land Use Rights, Net

5,846

5,854

Right of Use Asset

7,576

7,817

Intangible Assets, Net

3,888

3,999

Other Assets

813

982

TOTAL ASSETS

$

473,144

$

480,805

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES

Accounts Payable

$

25,593

$

29,482

Accrued Expenses

15,509

18,511

Current Lease Liability

1,038

1,030

Bank Acceptance Payable

6,469

15,860

Current Portion of Notes Payable and Long Term Debt

41,876

38,265

Total Current Liabilities

90,485

103,148

Notes Payable and Long Term Debt

19,360

13,904

Convertible Senior Notes

78,264

77,854

Other Long-Term Liabilities

7,744

8,008

TOTAL LIABILITIES

195,853

202,914

STOCKHOLDERS' EQUITY

TOTAL STOCKHOLDERS' EQUITY

277,291

277,891

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$

473,144

$

480,805

Applied Optoelectronics, Inc.

Preliminary Condensed Consolidated Statements of Operations

(In thousands, except per share data)

(Unaudited)

Three Months Ended
June 30,

Six Months Ended
June 30,

Revenue

2021

2020

2021

2020

Datacenter

22,392

52,533

48,331

85,797

CATV

27,599

6,141

46,238

10,364

Telecom

3,333

6,170

7,811

8,730

FTTH

298

1

722

1

Other

567

377

788

797

Total Revenue

54,189

65,222

103,890

105,689

Total Cost of Goods Sold

43,411

51,486

82,393

85,615

Total Gross Profit

10,778

13,736

21,497

20,074

Operating Expenses:

Research and Development

10,914

10,803

21,842

21,361

Sales and Marketing

2,832

3,430

5,792

6,366

General and Administrative

10,681

10,611

21,550

21,249

Total Operating Expenses

24,427

24,844

49,184

48,976

Operating Loss

(13,649

)

(11,108

)

(27,687

)

(28,902

)

Other Income (Expense):

Interest Income

16

47

32

194

Interest Expense

(1,367

)

(1,489

)

(2,798

)

(2,944

)

Other Income

6,370

861

6,410

979

Foreign Exchange Gain (Loss)

427

113

218

252

Total Other Expense:

5,446

(468

)

3,862

(1,519

)

Net loss before Income Taxes

(8,203

)

(11,576

)

(23,825

)

(30,421

)

Income Tax Expense

-

(7,024

)

0

(4,976

)

Net loss

(8,203

)

(18,600

)

(23,825

)

(35,397

)

Net loss per share attributable to common stockholders

basic

$

(0.31

)

$

(0.89

)

$

(0.89

)

$

(1.72

)

diluted

$

(0.31

)

$

(0.89

)

$

(0.89

)

$

(1.72

)

Weighted-average shares used to compute net loss per share attributable to common stockholders

basic

26,850

20,858

26,637

20,533

diluted

26,850

20,858

26,637

20,533



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,

2021

2020

2021

2020

GAAP total gross profit (a)

10,778

13,736

21,497

20,074

Non-recurring customer credit

-

-

-

-

Share-based compensation expense

267

237

468

483

Non-recurring expense

16

1

34

972

Expenses associated with discontinued products

2,461

1,077

3,750

1,431

Non-GAAP total gross profit (a)

13,522

15,051

25,749

22,960

GAAP net loss

(8,203

)

(18,600

)

(23,825

)

(35,397

)

Amortization of intangible assets

152

143

303

285

Share-based compensation expense

3,274

3,302

5,793

6,540

Non-recurring (income) expense

(6,246

)

(463

)

(5,744

)

806

Expenses associated with discontinued products

2,461

1,077

3,750

1,431

Non-cash expenses associated with discontinued products

1,213

953

2,427

2,210

Unrealized exchange loss (gain)

(133

)

43

710

(127

)

Non-GAAP tax benefit

3,346

8,562

6,938

10,477

Non-GAAP net loss

(4,136

)

(4,983

)

(9,648

)

(13,775

)

GAAP diluted net loss per share

(0.31

)

(0.89

)

(0.89

)

(1.72

)

Amortization of intangible assets

0.01

0.01

0.01

0.01

Share-based compensation expense

0.12

0.16

0.22

0.32

Non-recurring (income) expense

(0.23

)

(0.02

)

(0.22

)

0.04

Expenses associated with discontinued products

0.09

0.05

0.14

0.07

Non-cash expenses associated with discontinued products

0.05

0.04

0.09

0.10

Unrealized exchange loss (gain)

(0.00

)

0.00

0.03

(0.01

)

Non-GAAP tax benefit

0.12

0.41

0.26

0.51

Non-GAAP diluted net loss per share

(0.15

)

(0.24

)

(0.36

)

(0.68

)

Shares used to compute diluted loss per share

26,850

20,858

26,637

20,533

Shares used to compute diluted earnings per share

26,850

20,858

26,637

20,533

(a) Provided for the purpose of calculating gross profit as a percentage of revenue (gross margin).


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