Revenue and Growth - Q3 2024 GAAP revenue was $65.2 million, up from $43.3 million in Q2 2024 and $62.5 million in Q3 2023[4] - Total revenue for Q3 2024 was $65.151 million, compared to $62.547 million in Q3 2023, representing a 4.2% increase[17] - GAAP revenue for Q3 2024 was $65.151 million, compared to $62.547 million in Q3 2023[19] - Q4 2024 revenue guidance is between $94 million and $104 million[7] Gross Margin and Profitability - Q3 2024 GAAP gross margin was 24.4%, compared to 22.1% in Q2 2024 and 32.3% in Q3 2023[4] - Non-GAAP total gross profit for Q3 2024 was $16.264 million, compared to $20.327 million in Q3 2023[19] - Q4 2024 non-GAAP gross margin is expected to be between 27.5% and 29.5%[7] Net Loss and Earnings - Q3 2024 GAAP net loss was $17.8 million, or $0.42 per basic share, compared to a net loss of $26.1 million in Q2 2024 and $9.0 million in Q3 2023[5] - Q3 2024 non-GAAP net loss was $8.8 million, or $0.21 per basic share, compared to a non-GAAP net loss of $10.9 million in Q2 2024 and $1.7 million in Q3 2023[5] - Net loss for Q3 2024 was $17.757 million, compared to a net loss of $8.953 million in Q3 2023[17] - GAAP net loss for Q3 2024 was $(17.757) million, compared to $(8.953) million in Q3 2023[19] - Non-GAAP net loss for Q3 2024 was $(8.782) million, compared to $(1.691) million in Q3 2023[19] - Q4 2024 non-GAAP net income is projected to range from a loss of $1.9 million to income of $1.7 million[7] - GAAP diluted net loss per share for Q3 2024 was $(0.42), compared to $(0.27) in Q3 2023[19] - Non-GAAP diluted net loss per share for Q3 2024 was $(0.21), compared to $(0.05) in Q3 2023[19] Business Segment Performance - Data center business saw double-digit sequential growth driven by new wins for 400G products[3] - CATV business more than tripled from Q2 2024 due to customer transition to new architectures[3] - Datacenter revenue for Q3 2024 was $40.945 million, a decrease of 16.1% compared to $48.807 million in Q3 2023[17] - CATV revenue for Q3 2024 was $20.947 million, a significant increase of 104.1% compared to $10.268 million in Q3 2023[17] Research and Development - Accelerated R&D spending in Q3 2024 was driven by new customer requests, particularly for 1.6 Terabit transceivers in the data center business[3] - Research and development expenses for Q3 2024 were $13.428 million, a 42.0% increase compared to $9.457 million in Q3 2023[17] Operating Expenses - Total operating expenses for Q3 2024 were $32.464 million, a 20.8% increase compared to $26.860 million in Q3 2023[17] - Share-based compensation expense for Q3 2024 was $2.943 million, compared to $3.235 million in Q3 2023[19] - Expenses associated with discontinued products for Q3 2024 were $202 thousand, compared to $29 thousand in Q3 2023[19] Financial Position and Assets - Total assets as of September 30, 2024, were $409.972 million, up from $389.186 million as of December 31, 2023, representing a 5.3% increase[15] - Accounts receivable increased by 56.3% to $75.154 million as of September 30, 2024, compared to $48.071 million as of December 31, 2023[15] - Cash, cash equivalents, and restricted cash decreased by 24.9% to $41.367 million as of September 30, 2024, from $55.097 million as of December 31, 2023[15] - Total current liabilities increased by 25.4% to $117.102 million as of September 30, 2024, compared to $93.358 million as of December 31, 2023[15] Adjusted EBITDA and Other Metrics - Adjusted EBITDA for Q3 2024 was $(7.685) million, compared to $2.980 million in Q3 2023[19] - Shares used to compute diluted loss per share for Q3 2024 were 42,312, compared to 32,774 in Q3 2023[19]

Core Viewpoint - Applied Optoelectronics, Inc. is set to release its third quarter financial results on November 7, 2024, and will host a conference call to discuss these results and the outlook for the fourth quarter [1][2]. Company Overview - Applied Optoelectronics Inc. is a leading developer and manufacturer of advanced optical products, including components, modules, and equipment for broadband fiber access networks [3]. - The company's products are utilized in various markets, including internet datacenter, CATV broadband, telecom, and fiber-to-the-home (FTTH) [3]. - AOI supplies optical networking lasers, components, and equipment to tier-1 customers across these markets [3]. - The company has its headquarters, wafer fab, and advanced engineering and production facilities located in Sugar Land, Texas, along with engineering and manufacturing facilities in Taipei, Taiwan, and Ningbo, China [3].

Company Overview - Applied Optoelectronics (AAOI) shares increased by 13.7% to close at $15.98, with a significant trading volume compared to normal sessions, and a total gain of 46.2% over the past four weeks [1] - The company is recognized for its strong optical networking technology portfolio, enhancing its position in the cable TV (CATV) market, and benefiting from rising demand for its 100G products in the datacenter business [1] Financial Performance - The upcoming quarterly report for Applied Optoelectronics is expected to show a loss of $0.17 per share, reflecting a year-over-year decline of 240%, while revenues are projected to be $62.66 million, a slight increase of 0.2% from the previous year [1] - The consensus EPS estimate for the quarter has remained unchanged over the last 30 days, indicating a potential lack of momentum in earnings estimate revisions [2] Industry Context - Applied Optoelectronics is part of the Zacks Electronics - Semiconductors industry, where another company, AXT (AXTI), saw a 4% increase in its stock price, closing at $2.08, but has experienced a decline of 27.8% over the past month [2] - AXT's consensus EPS estimate for its upcoming report has also remained unchanged at -$0.06, which is a 50% improvement compared to the previous year [3]

Core Viewpoint - Applied Optoelectronics reported mixed Q2/2024 results, with revenue meeting expectations but non-GAAP gross margins falling short of projections. The company anticipates a significant revenue ramp-up in the latter half of the year and into 2025, despite previous projections not materializing as expected [1][9]. Financial Performance - Q2/2024 revenue was $43.3 million, aligning with expectations, while non-GAAP earnings per share were $(0.28) [1][2]. - Non-GAAP gross margin for Q2/2024 was 22.5%, below the guidance range of 25.5%-27.5% [2]. - The company’s total revenue for Q1/2024 was $40.7 million, with a gross margin of 18.7% [3]. - Free cash flow remained negative at $(6.1) million for Q2/2024, although the net debt position improved to $91.7 million [3]. Share Dilution and Capital Raising - The company raised $16.2 million in net proceeds from selling 1.48 million new shares, contributing to a 40% increase in outstanding shares since the beginning of 2023, leading to significant dilution for existing equity holders [4][5]. - The net debt position declined due to ongoing sales of newly issued shares [1][3]. Segment Performance - The Datacenter segment continued to be the primary revenue driver, generating $34.4 million in Q2/2024, while CATV and Telecom segments contributed $5.8 million and $2.4 million, respectively [6]. - The company has entered supply agreements with Microsoft for next-generation products, although the ramp-up has been slower than anticipated [6][8]. Future Outlook - Management projects a substantial increase in Microsoft-related revenue in late Q3, with expectations for increased orders for 400G data center products through the end of 2024 [8]. - Q4 revenues could approach $100 million, potentially leading to a return to profitability, although this will require significant working capital investments [8][9]. - Current consensus anticipates a revenue increase of approximately 75% next year, with earnings per share expected to exceed $0.50 [8][9].

Group 1: AI Market Overview - The artificial intelligence (AI) investment frenzy is cooling down as investors question the return on large capital expenditures in the sector [1] - Alphabet's second-quarter earnings report showed mixed results, with YouTube ad revenue at $8.7 billion, lower than expected, and capital expenditures rising to $13.2 billion, exceeding estimates [1] Group 2: Intel (INTC) - Intel's stock has dropped over 60% since the start of 2024, struggling to keep pace with competitors like Taiwan Semiconductor Manufacturing Company (TSMC) [3] - The company's Foundry business lost $7 billion last year, prompting a restructuring plan that includes layoffs of 15,000 workers and a dividend elimination [4] - Intel's recent investments in AI chips have negatively impacted its earnings per share, leading to soft guidance for Q3 and ongoing operational inefficiencies [4] Group 3: Qualcomm (QCOM) - Qualcomm's revenues declined 19% year-over-year to $35.8 billion, with handset chip revenues dropping 27% [6] - The company is betting on its new Snapdragon X Elite AI chips for Windows PCs, but consumer demand remains uncertain amid recession fears [6] - Qualcomm's stock has fallen 27% since its 52-week high of $227.09 in mid-July, with potential for further selling pressure [6] Group 4: Applied Optoelectronics (AAOI) - Applied Optoelectronics develops optical transceivers and laser components for data centers, but growth has been slower than expected [7] - The company has seen its shares plummet 60% since the start of the year, with no significant upward revisions to guidance anticipated [7]

The market wasn't in a forgiving mood when it disseminated the company's latest set of quarterly figures.Applied Optoelectronics (AAOI -5.76%), a company that manufactures fiber optics networking components, probably wishes it had called in sick on Wednesday. Its stock price fell by nearly 6% on the day, no thanks to a quarterly earnings report that displeased investors. That decline was far steeper than the almost 0.8% slide of the S&P 500 index.Revenue improvement, bottom-line erosionFor its second quarte ...

Applied Optoelectronics, Inc. (NASDAQ:AAOI) Q2 2024 Earnings Conference Call August 6, 2024 4:30 PM ET Company Participants Lindsay Savarese - IR Thompson Lin - Founder, Chairman and CEO Stefan Murry - CFO and Chief Strategy Officer Conference Call Participants Simon Leopold - Raymond James Timothy Savageaux - Northland Capital Markets Dave Kang - B. Riley FBR Operator Good afternoon. I will be your conference operator. At this time, I would like to welcome everyone to Applied Optoelectronics' Second Quarte ...

Applied Optoelectronics (AAOI) came out with a quarterly loss of $0.28 per share versus the Zacks Consensus Estimate of a loss of $0.29. This compares to loss of $0.21 per share a year ago. These figures are adjusted for non-recurring items.This quarterly report represents an earnings surprise of 3.45%. A quarter ago, it was expected that this maker of fiber optic products used by cable TV providers would post a loss of $0.29 per share when it actually produced a loss of $0.31, delivering a surprise of -6.9 ...

Financial Performance - Revenue for Q2 2024 was $43.27 million, a 4.0% increase from $41.62 million in Q2 2023[120] - Net loss for Q2 2024 was $26.12 million, or 60.4% of revenue, compared to a net loss of $16.94 million, or 40.7% of revenue in Q2 2023[120] - Total revenue for the three months ended June 30, 2024, was $43,270 million, a 4.0% increase from $41,615 million in the same period of 2023[124] - Comprehensive loss increased by $4.7 million, or 21.2%, for the three months ended June 30, 2024 compared to the same period in 2023, primarily due to an increase in net loss of $9.2 million[144] Profitability and Margins - Gross profit margin decreased to 22.1% in Q2 2024 from 19.0% in Q2 2023, reflecting increased cost of goods sold[120] - Gross margin for the three months ended June 30, 2024, was $9,562 million, representing 22.1% of revenue, compared to 19.0% in the same period of 2023[129] Expenses - Research and development expenses rose to $13.08 million, accounting for 30.2% of revenue in Q2 2024, compared to 20.8% in Q2 2023[120] - Total operating expenses increased to $35.81 million, representing 82.8% of revenue in Q2 2024, up from 57.3% in Q2 2023[120] - Sales and marketing expenses increased by $3,641 million, or 160.5%, for the three months ended June 30, 2024, compared to the same period in 2023[133] - Research and development expenses increased by $4,438 million, or 51.4%, for the three months ended June 30, 2024, compared to the same period in 2023[132] Customer Base and Revenue Sources - The company anticipates continued revenue generation from its top ten customers, which significantly contribute to overall sales[123] - The top ten customers represented 94% of revenue for the three months ended June 30, 2024, highlighting the need for customer base diversification[127] Manufacturing and Operations - The company operates three manufacturing sites in Sugar Land, Texas, Ningbo, China, and Taipei, Taiwan, with a focus on maintaining domestic production capacity[113][115] - The company has a vertically integrated manufacturing model that enhances product development speed and quality control[113] - The company is involved in an arbitration dispute regarding the termination of a divestiture agreement, which may impact future operations[119] - The company has begun to see increased orders for 400G data center products, expecting demand to rise through the end of 2024[125] - Construction costs for the new factory in Ningbo, China, are estimated at approximately $27.5 million, with $27.4 million paid as of June 30, 2024[160] - The company anticipates placing the new factory in service in 2024 after completing the building interior work[160] Cash Flow and Financing - Net cash used in operating activities for the six months ended June 30, 2024 was $30.5 million, with a net loss of $49.3 million after excluding non-cash items[154] - For the six months ended June 30, 2024, net cash used in investing activities was $12.2 million, mainly for the purchase of additional plant, machinery, and equipment[156] - The company issued $80.2 million of 5.25% convertible senior notes due 2026, generating net proceeds of $76.2 million after expenses[153] - Net cash provided by financing activities for the six months ended June 30, 2024 was $3.1 million, primarily due to proceeds from the ATM program[157] - As of June 30, 2024, the company had cash, cash equivalents, and restricted cash totaling $16.1 million, a decrease of approximately $39.0 million compared to December 31, 2023[161] - The total loan balance (excluding convertible notes) was $22.5 million, with an available borrowing capacity of $29.4 million on existing credit lines as of June 30, 2024[162] - The company raised $20.5 million under the authorized ATM Offering, with $4.5 million still available for future liquidity needs[162] Market Conditions and Future Outlook - The company is focused on high-performance segments within the internet data center, CATV, telecom, and FTTH markets, driven by increasing bandwidth demand[112] - The company intends to evaluate future investments for applicability to the tax credit provisions of the CHIPS Act[141] - Future capital requirements will depend on growth rate, R&D spending, and market acceptance of products[161] - The company is exploring additional sources of liquidity, including issuing equity or debt securities and selling assets if needed[162] - The company’s exposure to market risk has not changed materially since December 31, 2023[166] - The effective tax rate for the three months ended June 30, 2024 and 2023 was 0%, differing from the federal statutory rate of 21% due to changes in valuation allowances on deferred tax assets[140] Inflation Impact - The annual inflation rate in the US was 3.4% in 2023, while Taiwan's rate decreased to 2.7%[164] - The company does not believe inflation had a material impact on its business or financial condition during the three months ended June 30, 2024[164]

[Applied Optoelectronics Second Quarter 2024 Earnings Release](index=1&type=section&id=Applied%20Optoelectronics%20Reports%20Second%20Quarter%202024%20Results) [Second Quarter 2024 Financial Highlights](index=1&type=section&id=Second%20Quarter%202024%20Financial%20Summary) Applied Optoelectronics reported Q2 2024 GAAP revenue of $43.3 million, with gross margin improving to 22.1% despite a widened net loss of $26.1 million Q2 2024 Key Financial Metrics | Metric | Q2 2024 | Q2 2023 | Q1 2024 | | :--- | :--- | :--- | :--- | | **GAAP Revenue** | $43.3M | $41.6M | $40.7M | | **GAAP Gross Margin** | 22.1% | 19.0% | 18.7% | | **Non-GAAP Gross Margin** | 22.5% | 24.8% | 18.9% | | **GAAP Net Loss** | ($26.1M) | ($16.9M) | ($23.2M) | | **GAAP Loss Per Share** | ($0.66) | ($0.57) | ($0.60) | | **Non-GAAP Net Loss** | ($10.9M) | ($6.1M) | ($12.0M) | | **Non-GAAP Loss Per Share** | ($0.28) | ($0.21) | ($0.31) | [Management Commentary](index=1&type=section&id=Management%20Commentary) Management expressed optimism for H2 2024, citing new datacenter orders and the CATV DOCSIS 4.0 transition as key catalysts - The company has begun receiving orders for 400G products from a new large hyperscale customer[2](index=2&type=chunk) - The datacenter business showed improvement in Q2 and is expected to continue this trend throughout the year[2](index=2&type=chunk) - CATV sales were slower in Q2 as customers prepare for the DOCSIS 4.0 transition, but are expected to ramp up starting in Q3[2](index=2&type=chunk) [Third Quarter 2024 Business Outlook](index=1&type=section&id=Third%20Quarter%202024%20Business%20Outlook) Applied Optoelectronics projects Q3 2024 revenue of $60-66 million, non-GAAP gross margin of 24-26%, and a non-GAAP net loss of $5.9-8.6 million Q3 2024 Guidance (in millions) | Metric | Guidance Range | | :--- | :--- | | **Revenue** | $60 to $66 | | **Non-GAAP Gross Margin** | 24% to 26% | | **Non-GAAP Net Loss** | $5.9 to $8.6 | | **Non-GAAP Loss Per Share** | $0.14 to $0.20 | [Financial Statements](index=4&type=section&id=Financial%20Statements) Unaudited preliminary condensed consolidated financial statements are presented, including balance sheets, statements of operations, and GAAP to non-GAAP reconciliations [Condensed Consolidated Balance Sheets](index=4&type=section&id=Preliminary%20Condensed%20Consolidated%20Balance%20Sheets) As of June 30, 2024, total assets decreased to $348.0 million, driven by reduced cash, with corresponding declines in total liabilities and stockholders' equity Balance Sheet Highlights (in thousands) | Account | June 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Cash, Cash Equivalents and Restricted Cash | $16,118 | $55,097 | | Total Current Assets | $132,969 | $172,605 | | **Total Assets** | **$348,040** | **$389,186** | | Total Current Liabilities | $80,939 | $93,358 | | **Total Liabilities** | **$161,546** | **$174,317** | | **Total Stockholders' Equity** | **$186,494** | **$214,869** | [Condensed Consolidated Statements of Operations](index=5&type=section&id=Preliminary%20Condensed%20Consolidated%20Statements%20of%20Operations) Q2 2024 total revenue increased to $43.3 million, driven by Datacenter growth, but offset by CATV and Telecom declines, leading to a $26.1 million GAAP net loss Revenue by Segment - Q2 2024 vs Q2 2023 (in thousands) | Segment | Q2 2024 | Q2 2023 | YoY Change | | :--- | :--- | :--- | :--- | | Datacenter | $34,352 | $27,571 | +24.6% | | CATV | $5,818 | $9,343 | -37.7% | | Telecom | $2,379 | $4,231 | -43.8% | | **Total Revenue** | **$43,270** | **$41,615** | **+4.0%** | Income Statement Summary - Q2 2024 vs Q2 2023 (in thousands) | Metric | Q2 2024 | Q2 2023 | | :--- | :--- | :--- | | Total Revenue | $43,270 | $41,615 | | Total Gross Profit | $9,562 | $7,898 | | Operating Loss | ($26,244) | ($15,965) | | **Net Loss** | **($26,115)** | **($16,944)** | [Reconciliation of GAAP to Non-GAAP Measures](index=6&type=section&id=Reconciliation%20of%20Statements%20of%20Operations%20under%20GAAP%20and%20Non-GAAP) Q2 2024 GAAP net loss of $26.1 million was reconciled to a non-GAAP net loss of $10.9 million, with adjustments including share-based compensation and non-recurring expenses Q2 2024 GAAP to Non-GAAP Net Loss Reconciliation (in thousands) | Description | Amount | | :--- | :--- | | **GAAP Net Loss** | **($26,115)** | | Share-based compensation expense | $6,058 | | Non-cash expenses associated with discontinued products | $1,061 | | Amortization of intangible assets | $100 | | Non-recurring (income) expense | $1,576 | | Unrealized exchange gain | ($107) | | Tax (benefit) expense related to the above | $6,571 | | **Non-GAAP Net Loss** | **($10,856)** | [Supplementary and Legal Information](index=2&type=section&id=Supplementary%20Information) This section provides details on the conference call, forward-looking statements, and explanations of non-GAAP financial measures [Conference Call Information](index=2&type=section&id=Conference%20Call%20Information) Details for the August 6, 2024 conference call and webcast discussing Q2 2024 results and Q3 2024 outlook are provided - A conference call was held on August 6, 2024, at 4:30 p.m. Eastern time to discuss financial results and outlook, with replay information also provided[6](index=6&type=chunk) [Forward-Looking Statements](index=2&type=section&id=Forward-Looking%20Information) This section provides a safe harbor warning for forward-looking statements, noting they are subject to risks and uncertainties that could cause actual results to differ - The report includes forward-looking statements regarding the Q3 2024 outlook, which are subject to risks and uncertainties that could cause actual results to differ[7](index=7&type=chunk) - Key risks mentioned include changes in customer orders, manufacturing volatility, supply chain disruptions, and reliance on a small number of customers[7](index=7&type=chunk) [Non-GAAP Financial Measures Explanation](index=2&type=section&id=Non-GAAP%20Financial%20Measures) The company explains its use of non-GAAP financial measures to evaluate core operating performance, excluding specific adjustments, and does not reconcile forward-looking non-GAAP guidance to GAAP - Non-GAAP measures are used to eliminate items that management does not consider indicative of overall operating performance, such as stock-based compensation, amortization, and non-recurring expenses[8](index=8&type=chunk)[9](index=9&type=chunk) - Management believes these non-GAAP measures provide better comparability with past performance and peer companies[9](index=9&type=chunk) - The company has not reconciled its Q3 2024 non-GAAP guidance to the corresponding GAAP measures because certain items are not readily determinable on a forward-looking basis[11](index=11&type=chunk)