Applied Optoelectronics Reports First Quarter 2023 Results

SUGAR LAND, Texas, May 04, 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 first quarter 2023 ended March 31, 2023.

“We continued to see steady improvement in our gross margin in the first quarter,” said Dr. Thompson Lin, Applied Optoelectronics Inc. Founder, President and Chief Executive Officer. “Further, we are encouraged by the improving demand we saw for our 100G products in our datacenter business, and we generated another quarter of good CATV results. However, recently we were notified of some inventory build-up with certain CATV customers which we expect will negatively impact our Q2 revenue. With respect to the transaction that we announced in September 2022 that we have entered into an agreement with Yuhan Optoelectronic Technology for the sale of our manufacturing facilities located in the People’s Republic of China and certain assets related to our transceiver business and multi-channel optical sub-assembly products for the internet datacenter, telecom and FTTH markets, we continue to make progress in gathering the information necessary to obtain required regulatory approvals and expect that the transaction will close in 2023 or early 2024.”

First Quarter 2023 Financial Summary

• GAAP revenue was $53.0 million, compared $52.2 million in the first quarter of 2022 and $61.6 million in the fourth quarter of 2022.
  
• GAAP gross margin was 17.4%, compared with 17.3% in the first quarter of 2022 and 10.1% in the fourth quarter of 2022. Non-GAAP gross margin was 23.2%, compared with 17.5% in the first quarter of 2022 and 21.4% in the fourth quarter of 2022.
  
• GAAP net loss was $16.3 million, or $0.56 per basic share, compared with net loss of $16.1 million, or $0.58 per basic share in the first quarter of 2022, and a net loss of $20.3 million, or $0.71 per basic share in the fourth quarter of 2022.
  
• Non-GAAP net loss was $7.1 million, or $0.25 per basic share, compared with non-GAAP net loss of $7.9 million, or $0.29 per basic share in the first quarter of 2022, and a non-GAAP net loss of $5.4 million, or $0.19 per basic share in the fourth quarter of 2022.
  

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.

Second Quarter 2023 Business Outlook ⁽⁺⁾

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

• Revenue in the range of $40.5 million to $47.5 million.
• Non-GAAP gross margin in the range of 20.5% to 23.5%.
• Non-GAAP net loss in the range of $6.8 million to $9.0 million, and non-GAAP loss per share in the range of $0.23 to $0.31 using approximately 29.2 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 May 4, 2023 to discuss its first quarter 2023 results and outlook for its second 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 3456304.

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 second 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 Q1 2023 and Q1 2022, and FY 2023 and FY 2022, 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 Q1 2023 to our non-GAAP net income (loss) and earnings (loss) per share is provided below, together with corresponding reconciliations for Q1 2022.

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)
	March 31, 2023				December 31, 2022
ASSETS
CURRENT ASSETS
Cash, Cash Equivalents and Restricted Cash	$	26,948			$	35,587
Accounts Receivable, Net		56,799				61,175
Notes receivable		1,079				339
Inventories		70,186				79,679
Prepaid Income Tax
Prepaid Expenses and Other Current Assets		6,517				6,384
Total Current Assets		161,529				183,164
Property, Plant And Equipment, Net		207,171				210,184
Land Use Rights, Net		5,278				5,238
Operating Right of Use Asset		5,381				5,566
Financing Right of Use Asset		18				26
Intangible Assets, Net		3,655				3,699
Deferred Income Tax Assets		-				-
Other Assets		519				386
TOTAL ASSETS	$	383,551			$	408,263
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
Accounts Payable	$	38,419			$	47,845
Bank Acceptance Payable		19,196				12,337
Accrued Expenses		13,505				17,222
Deferred Revenue		2,763				3,000
Current Lease Liability-Operating		1,035				1,041
Current Lease Liability-Financing		58				63
Current Portion of Notes Payable and Long Term Debt		50,921				57,074
Current Portion of Convertible Debt		79,710				-
Total Current Liabilities		205,607				138,582
Notes Payable and Long Term Debt		-				-
Convertible Senior Notes		-				79,506
Other Long-Term Liabilities		5,307				5,505
TOTAL LIABILITIES		210,914				223,593
STOCKHOLDERS’ EQUITY
TOTAL STOCKHOLDERS’ EQUITY		172,637				184,668
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	383,551			$	408,261

Applied Optoelectronics, Inc.
Preliminary Condensed Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)
Q1 2023	Three Months Ended March 31,
Revenue		2023				2022
CATV		27,779				24,980
Datacenter		20,353				21,415
Telecom		3,707				5,265
FTTH		2				98
Other		1,189				484
Total Revenue		53,030				52,242
Total Cost of Goods Sold		43,786				43,217
Total Gross Profit		9,244				9,025
Operating Expenses:
Research and Development		8,536				9,486
Sales and Marketing		2,327				2,558
General and Administrative		12,548				11,220
Total Operating Expenses		23,411				23,264
Operating Loss		(14,167	)			(14,239	)
Other Income (Expense):
Interest Income		33				28
Interest Expense		(2,137	)			(1,401	)
Other Income (Expense), net		(21	)			(450	)
Total Other Income (Expense):		(2,125	)			(1,823	)
Net loss before Income Taxes		(16,292	)			(16,062	)
Income Tax Expense		0				0
Net loss	$	(16,292	)		$	(16,062	)
Net loss per share attributable to common stockholders
basic	$	(0.56	)		$	(0.58	)
diluted	$	(0.56	)		$	(0.58	)
Weighted-average shares used to compute net loss per share attributable to common stockholders
basic		28,872				27,463
diluted		28,872				27,463

Applied Optoelectronics, Inc.
Reconciliation of Statements of Operations under GAAP and Non-GAAP
(In thousands, except per share data)
(Unaudited)
	Three Months Ended March 31,
		2023				2022
GAAP revenue	$	53,030			$	52,242
Non-recurring customer credit		-				-
Non-GAAP revenue	$	53,030			$	52,242
GAAP total gross profit(a)	$	9,244			$	9,025
Share-based compensation expense		114				136
Non-recurring expense		0				0
Expenses associated with discontinued products		2,962				0
Non-GAAP total gross profit(a)	$	12,320			$	9,161
GAAP net loss	$	(16,292	)		$	(16,062	)
Share-based compensation expense		2,290				2,472
Expenses associated with discontinued products		2,962				0
Non-cash expenses associated with discontinued products		1,162				1,166
Amortization of intangible assets		159				152
Non-recurring (income) expense		358				25
Unrealized exchange loss (gain)		(1,109	)			981
Non-GAAP tax benefit		3,327				3,394
Non-GAAP net loss	$	(7,143	)		$	(7,872	)
GAAP diluted net loss per share	$	(0.56	)		$	(0.58	)
Share-based compensation expense		0.08				0.09
Expenses associated with discontinued products		0.10				-
Non-cash expenses associated with discontinued products		0.04				0.04
Amortization of intangible assets		0.01				0.01
Non-recurring (income) expense		0.01				0.00
Unrealized exchange loss (gain)		(0.04	)			0.04
Non-GAAP tax benefit		0.12				0.12
Non-GAAP diluted net loss per share	$	(0.25	)		$	(0.29	)
Shares used to compute diluted loss per share		28,872				27,463
Shares used to compute diluted earnings per share		28,872				27,463
(a) Provided for the purpose of calculating gross profit as a percentage of revenue (gross margin).