UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

 

______________

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported): August 7, 2019

 

______________

 

Applied Optoelectronics, Inc.

(Exact name of Registrant as specified in its charter)

 

Delaware 001-36083 76-0533927
(State or incorporation) (Commission File Number) (I.R.S. Employer Identification No.)

 

13139 Jess Pirtle Blvd.

Sugar Land, TX 77478

(address of principal executive offices and zip code)

 

(281) 295-1800

(Registrant’s telephone number, including area code)

______________

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each Class Trading Symbol Name of each exchange on which registered
Common Stock, Par value $0.001 AAOI NASDAQ Global Market

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

 

Emerging growth company ☐

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

 

 

 

     
 

 

ITEM 2.02. RESULTS OF OPERATIONS AND FINANCIAL CONDITION.

 

On August 7, 2019 Applied Optoelectronics, Inc. (the “Company”) issued a press release regarding the Company’s financial results for the second quarter ended June 30, 2019. A copy of the Company’s press release is attached as Exhibit 99.1 to this Form 8-K.

 

The information furnished in this Current Report under this Item 2.02 and the exhibits attached hereto shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.

 

ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS.

 

(d) Exhibits

 

  Exhibit Number Description
     
99.1 Press release dated August 7, 2019, issued by Applied Optoelectronics, Inc., filed herewith.

 

 

 

 

 

 

 

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SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

  Applied Optoelectronics, Inc.  
       
       
  By: /s/ STEFAN J. MURRY  
  Name Stefan J. Murry  
  Title: Chief Financial Officer  

Date: August 7, 2019

Exhibit 99.1

 

 

 

Applied Optoelectronics Reports Second Quarter 2019 Results

 

Sugar Land, Texas, August 7, 2019 – 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 ended June 30, 2019.

 

“We are pleased with our execution in the quarter as we delivered revenue within our guidance range and achieved better than expected bottom-line results,” said Dr. Thompson Lin, Applied Optoelectronics Inc. founder and CEO. “The datacenter demand environment remained consistent with our expectations and we secured five new datacenter design wins. We continue to have good technical engagement with both existing and new customers and are encouraged by the positive response to our innovations.”

 

Second Quarter 2019 Financial Summary

 

· Total revenue was $43.4 million, compared with $87.8 million in the second quarter of 2018 and $52.7 million in the first quarter of 2019.

 

· GAAP gross margin was 24.3%, compared with 38.6% in the second quarter of 2018 and 23.4% in the first quarter of 2019. Non-GAAP gross margin was 27.2%, compared with 40.4% in the second quarter of 2018 and 25.5% in the first quarter of 2019.

 

· GAAP net loss was $11.4 million, or $0.57 per basic share, compared with net income of $8.0 million, or $0.40 per diluted share in the second quarter of 2018, and a net loss of $10.5 million, or $0.53 per basic share in the first quarter of 2019.

 

· Non-GAAP net loss was $5.2 million, or $0.26 per basic share, compared with non-GAAP net income of $12.9 million, or $0.64 per diluted share in the second quarter of 2018, and a non-GAAP net loss of $5.4 million, or $0.27 per basic share in the first quarter of 2019.

 

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 2019 Business Outlook (+)

 

For the third quarter of 2019, the company currently expects:

 

· Revenue in the range of $46 million to $49 million.
· Non-GAAP gross margin in the range of 27% to 29%.
· Non-GAAP net loss in the range of $4.2 million to $5.7 million, and non-GAAP loss per share in the range of $0.21 to $0.28 using approximately 20.0 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.

 

 

 

 

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Conference Call Information

 

The company will host a conference call and webcast for analysts and investors on August 7, 2019 to discuss its second quarter 2019 results and outlook for its third quarter 2019 at 4:30 p.m. Eastern time / 3:30 p.m. Central time. Open to the public, investors may access the call by dialing (412) 717-9586. 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 (412) 317-0088 and entering passcode 10133532.

 

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 2019. 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; 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, 2018. 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-recurring tax expenses (benefits), and expenses associated with discontinued products, if any, from our GAAP net income (loss). Included in our non-recurring expenses in Q2 2019 and Q2 2018 are certain legal and consulting fees (if any) and employee severance expenses (if any). Also included in our non-recurring expenses in the six months ended June 30, 2019, but not included in our results in Q2 2019 or in the corresponding periods during the prior year, was the unamortized debt issuance costs associated with the extinguishment of certain debt. Non-cash expenses associated with discontinued products in Q2 2019 and Q2 2018 include depreciation on certain equipment undergoing reconfiguration. Other expenses associated with discontinued products in Q2 2019 and Q2 2018 include inventory obsolescence charges associated with materials used in the manufacture of these discontinued products.

 

 

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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, unrealized foreign exchange gain or loss, stock-based compensation expense and non-recurring revenue and expenses are 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 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 2019 to our non-GAAP net income (loss) and earnings (loss) per share is provided below, together with corresponding reconciliations for the three month period ended June 30, 2019.

 

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 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, 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. 

 

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Investor Relations Contacts:

 

The Blueshirt Group, Investor Relations

Maria Riley

+1-415-217-7722

ir@ao-inc.com

 

 

 

 

 

 

 

 

 

 

 

 

 

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Applied Optoelectronics, Inc.

Preliminary Condensed Consolidated Balance Sheets

(In thousands, except per share data)

(Unaudited)

 

    June 30, 2019     December 31, 2018  
             
ASSETS                
CURRENT ASSETS                
Cash, Cash Equivalents and Restricted Cash   $ 83,987     $ 58,004  
Accounts Receivable, Net     28,406       30,534  
Notes receivable     136        
Inventories     81,475       93,256  
Prepaid Income Tax     1,312       1,188  
Prepaid Expenses and Other Current Assets     5,719       11,293  
Total Current Assets     201,035       194,275  
                 
Property, Plant And Equipment, Net     247,887       234,211  
Land Use Rights, Net     5,743       5,814  
Right of Use Asset     7,912        
Intangible Assets, Net     4,028       3,977  
Deferred Income Tax Assets     27,437       21,714  
Other Assets     1,080       6,849  
TOTAL ASSETS   $ 495,122     $ 466,840  
                 
LIABILITIES AND STOCKHOLDERS' EQUITY                
                 
CURRENT LIABILITIES                
Accounts Payable   $ 31,526     $ 29,910  
Accrued Expenses     13,986       19,291  
Current Lease Liability     903        
Bank Acceptance Payable     2,532       4,628  
Current Portion of Notes Payable and Long Term Debt     19,180       23,589  
Total Current Liabilities     68,127       77,418  
                 
Notes Payable and Long Term Debt     30,468       60,328  
Convertible Senior Notes     76,630        
Other Long-Term Liabilities     8,182        
TOTAL LIABILITIES     183,407       137,746  
                 
STOCKHOLDERS' EQUITY                
TOTAL STOCKHOLDERS' EQUITY     311,715       329,094  
                 
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY   $ 495,122     $ 466,840  

 

 

 

 

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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   2019     2018     2019     2018  
 Datacenter   $ 31,806     $ 69,040     $ 70,305     $ 119,623  
 CATV     9,818       14,184       21,780       24,752  
 Telecom     1,630       4,157       3,368       7,743  
 FTTH     16       166       110       277  
 Other     141       275       567       666  
Total Revenue     43,411       87,822       96,130       153,061  
                                 
Total Cost of Goods Sold     32,873       53,959       73,241       93,362  
                                 
Total Gross Profit     10,538       33,863       22,889       59,699  
                                 
Operating Expenses:                                
 Research and Development     11,151       12,645       22,336       24,381  
 Sales and Marketing     2,331       2,377       4,926       4,851  
 General and Administrative     10,884       9,898       21,324       19,354  
Total Operating Expenses     24,366       24,920       48,586       48,586  
                                 
Operating Income (Loss)     (13,828 )     8,943       (25,697 )     11,113  
                                 
Other Income (Expense):                                
 Interest Income     310       85       382       137  
 Interest Expense     (1,490 )     (279 )     (2,486 )     (350 )
 Other Income     235       292       313       305  
 Foreign Exchange Gain (Loss)     216       1,289       (17 )     249  
Total Other Income (Expense):     (729 )     1,387       (1,808 )     341  
                                 
Net Income (loss) before Income Taxes     (14,557 )     10,330       (27,505 )     11,454  
                                 
Income Tax Benefit (Expense)     3,191       (2,296 )     5,665       (1,300 )
                                 
Net Income (loss)   $ (11,366 )   $ 8,034     $ (21,840 )   $ 10,154  
                                 
Net income (loss) per share attributable to common stockholders                                
 basic   $ (0.57 )   $ 0.41     $ (1.10 )   $ 0.52  
 diluted   $ (0.57 )   $ 0.40     $ (1.10 )   $ 0.51  
                                 
Weighted-average shares used to compute net income (loss) per share attributable to common stockholders                                
 basic     19,932       19,590       19,898       19,541  
 diluted     19,932       20,080       19,898       20,012  

 

 

 

 

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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,
 
    2019     2018     2019     2018  
GAAP total gross profit (a)   $ 10,538     $ 33,863     $ 22,889     $ 59,699  
Share-based compensation expense     199       211       388       388  
Non-recurring expense                       7  
Expenses associated with discontinued products     1,067       1,432       1,992       1,503  
Non-GAAP total gross profit (a)     11,804       35,506       25,269       61,597  
                                 
GAAP net income (loss)     (11,366 )     8,034       (21,840 )     10,154  
Amortization of intangible assets     133       127       263       253  
Share-based compensation expense     3,020       2,900       5,963       5,469  
Non-recurring charges     812       330       1,054       620  
Expenses associated with discontinued products     1,067       1,432       1,992       1,503  
Non-cash expenses associated with discontinued products     1,116       1,004       2,133       1,755  
Unrealized exchange loss (gain)     56       (911 )     (171 )     (1,114 )
Non-recurring tax benefit           (48 )           (162 )
Non-GAAP net income (loss)     (5,162 )     12,868       (10,606 )     18,478  
                                 
GAAP diluted net income (loss) per share   $ (0.57 )   $ 0.40     $ (1.10 )   $ 0.51  
Amortization of intangible assets     0.01       0.01       0.01       0.01  
Share-based compensation expense     0.15       0.14       0.30       0.27  
Non-recurring charges     0.04       0.02       0.05       0.03  
Expenses associated with discontinued products     0.05       0.07       0.10       0.08  
Non-cash expenses associated with discontinued products     0.06       0.05       0.11       0.09  
Loss from disposal of idle assets                        
Unrealized exchange loss (gain)     0.00       (0.05 )     (0.01 )     (0.06 )
Non-recurring tax benefit           (0.00 )           (0.01 )
Non-GAAP diluted net income (loss) per share   $ (0.26 )   $ 0.64     $ (0.53 )   $ 0.92  
                                 
Shares used to compute diluted loss per share     19,932       19,590       19,898       19,541  
Shares used to compute diluted earnings per share     19,932       20,080       19,898       20,012  

 

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

 

 

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