0001158114 false 0001158114 2023-11-09 2023-11-09 iso4217:USD xbrli:shares iso4217:USD xbrli:shares

 

 

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): November 9, 2023

 

Applied Optoelectronics, Inc.

(Exact name of registrant as specified in its charter)

 

Delaware 001-36083 76-0533927

(State or other jurisdiction of incorporation)

(Commission File Number)

(IRS Employer Identification No.)

 

13139 Jess Pirtle Blvd.
Sugar Land, Texas
  77478

(Address of principal executive offices)   (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 (see General Instruction A.2. below):

 

¨       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(s) Trading 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 November 9, 2023, Applied Optoelectronics, Inc. (the “Company”) issued a press release regarding the Company’s financial results for the third quarter ended September 30, 2023. 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 No. Description
   
99.1

Press 99.1 release dated November 9, 2023, issued by Applied Optoelectronics, Inc., filed herewith.

   
104 Cover Page Interactive Data File (embedded within the Inline XBRL document).

 

 

 

 

 

 

 

 

 2 

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant 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
 

 

Stefan J. Murry

 

 

Chief Financial Officer

 

Date: November 9, 2023

 

 

 

 

 

 

 

 3 

 

Exhibit 99.1

 

 

Applied Optoelectronics Reports Third Quarter 2023 Results

 

Sugar Land, Texas, November 9, 2023 – 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 third quarter 2023 ended September 30, 2023.

 

“We’re pleased by the continued progress we have made on improving our gross margin, which exceeded our expectations during the third quarter, driven primarily by our favorable product mix,” said Dr. Thompson Lin, Applied Optoelectronics Inc. Founder, President and Chief Executive Officer. “We saw increased demand for both our 100G and 400G products in our datacenter business during the quarter, and we expect this trend to continue as datacenter operators transition their networks. We also shipped our first samples of 800G datacenter products to two different customers this quarter. We’re encouraged by the sequential growth we saw in our CATV business, and believe that our market-leading amplifier products and experienced team position us well as the MSOs transition to next generation architecture.”

 

Third Quarter 2023 Financial Summary

 

·GAAP revenue was $62.5 million, compared $56.7 million in the third quarter of 2022 and $41.6 million in the second quarter of 2023.
   
·GAAP gross margin was 32.3%, compared with 17.2% in the third quarter of 2022 and 19.0% in the second quarter of 2023. Non-GAAP gross margin was 32.5%, compared with 18.0% in the third quarter of 2022 and 24.8% in the second quarter of 2023.
   
·GAAP net loss was $9.0 million, or $0.27 per basic share, compared with net loss of $15.6 million, or $0.56 per basic share in the third quarter of 2022, and a net loss of $16.9 million, or $0.57 per basic share in the second quarter of 2023.
   
·Non-GAAP net loss was $1.7 million, or $0.05 per basic share, compared with non-GAAP net loss of $7.1 million, or $0.26 per basic share in the third quarter of 2022, and a non-GAAP net loss of $6.1 million, or $0.21 per basic share in the second 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.

 

 

 

 1 

 

 

Fourth Quarter 2023 Business Outlook (+)

 

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

 

·Revenue in the range of $63 million to $67 million.
·Non-GAAP gross margin in the range of 34.5% to 36%.
·Non-GAAP net profit in the range of a loss of $0.9 million to profit of $1.2 million, and non-GAAP earnings per share in the range of a loss of $0.02 to earnings of $0.04 using approximately 35.1 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 November 9, 2023 to discuss its third quarter 2023 results and outlook for its fourth quarter of 2023 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 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 9074673.

 

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 fourth 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 and our Quarterly Report on Form 10-Q for the quarter ended September 30, 2023. 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.

 

 

 

 2 

 

 

Non-GAAP Financial Measures

 

We provide non-GAAP gross margin, non-GAAP net income (loss), adjusted EBITDA, 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 Q3 2023, Q3 2022 and Q2 2023 are certain non-recurring expenses related to extreme weather and pandemic events, non-recurring tax expenses or benefits (if any), and employee severance expenses (if any). Also included in our non-recurring expenses in Q3 2023, but not in Q3 2022 or Q2 2023 are certain non-recurring legal expenses associated with litigation and certain legal and advisory expenses associated with the termination of the purchase agreement with Yuhan Optoelectronic Technology (Shanghai) Co., Ltd. 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 from our non-GAAP net income (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) and GAAP earnings (loss) per share for Q3 2023 to our non-GAAP net income (loss) and earnings (loss) per share is provided below, together with corresponding reconciliations for Q3 2022. 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 was provided in our Q2 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.

 

 

 

 3 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 4 

 

 

Applied Optoelectronics, Inc.

Preliminary Condensed Consolidated Balance Sheets

(In thousands)

(Unaudited)

 

   September 30, 2023   December 31, 2022 
         
ASSETS          
CURRENT ASSETS          
Cash, Cash Equivalents and Restricted Cash  $31,241   $35,587 
Accounts Receivable, Net   60,751    61,175 
Notes receivable       339 
Inventories   67,533    79,679 
Prepaid Income Tax   2     
Prepaid Expenses and Other Current Assets   4,871    6,384 
Total Current Assets   164,398    183,164 
           
Property, Plant And Equipment, Net   193,828    210,184 
Land Use Rights, Net   4,992    5,238 
Operating Right of Use Asset   4,992    5,566 
Financing Right of Use Asset   3    26 
Intangible Assets, Net   3,626    3,699 
Other Assets   1,953    386 
TOTAL ASSETS  $373,792   $408,263 
           
LIABILITIES AND STOCKHOLDERS' EQUITY          
           
CURRENT LIABILITIES          
Accounts Payable  $34,854   $47,845 
Bank Acceptance Payable   14,383    12,337 
Accrued Expenses   16,383    17,222 
Deferred Revenue   10,073    3,000 
Current Lease Liability-Operating   1,059    1,041 
Current Lease Liability-Financing   49    63 
Current Portion of Notes Payable and Long Term Debt   31,323    57,074 
Current Portion of Convertible Debt   80,124     
Total Current Liabilities   188,248    138,582 
           
Deferred Revenue, net of current portion   2,424     
Convertible Senior Notes       79,506 
Other Long-Term Liabilities   4,767    5,505 
TOTAL LIABILITIES   195,439    223,593 
           
STOCKHOLDERS' EQUITY          
Total Preferred Stock          
Common Stock   34    29 
Additional Paid-in Capital   431,766    391,526 
Cumulative Translation Adjustment   (2,188)   2,183 
Retained Earnings   (251,259)   (209,068)
TOTAL STOCKHOLDERS' EQUITY   178,353    184,670 
           
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY  $373,792   $408,263 

 

 

 

 5 

 

 

Applied Optoelectronics, Inc.

Preliminary Condensed Consolidated Statements of Operations

(In thousands, except per share data)

(Unaudited)

 

   Three Months Ended
September 30,
   Nine Months Ended
September 30,
 
   2023   2022   2023   2022 
                 
Revenue                    
CATV  $10,268   $31,260   $47,391   $79,953 
Datacenter   48,807    17,697    96,731    60,608 
Telecom   3,074    6,821    11,013    18,362 
FTTH           57    124 
Other   398    915    2,001    2,186 
Total Revenue   62,547    56,693    157,193    161,233 
                     
Total Cost of Goods Sold   42,373    46,944    119,876    133,832 
                     
Total Gross Profit   20,174    9,749    37,317    27,401 
                     
Operating Expenses:                    
Research and Development   9,457    9,206    26,633    27,021 
Sales and Marketing   3,035    2,385    7,631    7,107 
General and Administrative   14,368    11,654    39,870    33,908 
Total Operating Expenses   26,860    23,245    74,134    68,036 
                     
Operating Loss   (6,686)   (13,496)   (36,817)   (40,635)
                     
Other Income (Expense):                    
Interest Income   65    31    133    90 
Interest Expense   (1,989)   (1,621)   (6,301)   (4,431)
Other Income (Expense), net   (343)   (541)   803    (1,171)
Total Other Income (Expense):   (2,267)   (2,131)   (5,365)   (5,512)
                     
Net loss before Income Taxes   (8,953)   (15,627)   (42,182)   (46,147)
                     
Income Tax Expense           (8)    
                     
Net loss  $(8,953)  $(15,627)  $(42,190)  $(46,147)
                     
Net loss per share attributable to common stockholders                    
basic  $(0.27)  $(0.56)  $(1.39)  $(1.67)
diluted  $(0.27)  $(0.56)  $(1.39)  $(1.67)
                     
Weighted-average shares used to compute   net loss per share attributable to common stockholders                    
basic   32,774    27,839    30,392    27,640 
diluted   32,774    27,839    30,392    27,640 

 

 

 6 

 

 

Applied Optoelectronics, Inc.

Reconciliation of Statements of Operations under GAAP and Non-GAAP

(In thousands, except per share data)

(Unaudited)

 

   Three Months Ended
September 30,
   Nine Months Ended
September 30,
 
   2023   2022   2023   2022 
                 
GAAP revenue  $62,547   $56,693   $157,193   $161,233 
Non-recurring customer credit                
Non-GAAP revenue  $62,547   $56,693   $157,193   $161,233 
                     
GAAP total gross profit (a)  $20,174   $9,749   $37,317   $27,401 
Share-based compensation expense   124    121    393    371 
Non-recurring expense       256        256 
Expenses associated with discontinued products   29    56    5,245    57 
Non-GAAP total gross profit (a)  $20,327   $10,182   $42,955   $28,085 
                     
GAAP net loss  $(8,953)  $(15,627)  $(42,190)  $(46,147)
Share-based compensation expense   3,235    2,627    8,587    7,243 
Expenses associated with discontinued products   29    57    5,245    57 
Non-cash expenses associated with discontinued products   864    1,209    3,175    3,478 
Amortization of intangible assets   167    154    489    458 
Non-recurring (income) expense   1,344    185    2,303    219 
Unrealized exchange loss (gain)   423    963    (752)   2,243 
Non-GAAP tax benefit   1,200    3,300    8,237    9,845 
Loss from disposal of idle assets                
Non-GAAP net loss  $(1,691)  $(7,132)  $(14,906)  $(22,604)
                     
GAAP net loss  $(8,953)  $(15,627)  $(42,190)  $(46,147)
Share-based compensation expense   3,235    2,627    8,587   $7,243 
Expenses associated with discontinued products   29    57    5,245   $57 
Non-cash expenses associated with discontinued products   864    1,209    3,175   $3,478 
Amortization of intangible assets   167    154    489   $458 
Non-recurring expense (income)   1,344    185    2,303   $219 
Unrealized exchange loss (gain)   423    963    (752)  $2,243 
Tax (benefit) expense related to the above           8     
Depreciation expense   3,946    4,339    11,836   $13,763 
Interest (income) expense, net   1,925    1,590    6,167   $4,341 
Adjusted EBITDA  $2,980   $(4,503)  $(5,132)  $(14,345)
                     
GAAP diluted net loss per share  $(0.27)  $(0.56)  $(1.39)  $(1.67)
Share-based compensation expense   0.10    0.09    0.28    0.26 
Expenses associated with discontinued products           0.17    0.00 
Non-cash expenses associated with discontinued products   0.03    0.04    0.10    0.13 
Amortization of intangible assets   0.01    0.01    0.02    0.02 
Non-recurring (income) expense   0.04    0.01    0.08    0.01 
Unrealized exchange loss (gain)   0.01    0.03    (0.02)   0.08 
Non-GAAP tax benefit   0.03    0.12    0.27    0.35 
Non-GAAP diluted net loss per share  $(0.05)  $(0.26)  $(0.49)  $(0.82)
                     
Shares used to compute diluted loss per share   32,774    27,839    30,392    27,640 
Shares used to compute diluted earnings per share   32,774    27,839    30,392    27,640 

 

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

 

 

 7