Applied Optoelectronics(AAOI) - 2024 Q2 - Quarterly Results

Applied Optoelectronics Second Quarter 2024 Earnings Release Second Quarter 2024 Financial Highlights 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 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] - The datacenter business showed improvement in Q2 and is expected to continue this trend throughout the year[2] - 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] Third Quarter 2024 Business Outlook 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 Unaudited preliminary condensed consolidated financial statements are presented, including balance sheets, statements of operations, and GAAP to non-GAAP reconciliations Condensed Consolidated Balance Sheets 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 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 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 This section provides details on the conference call, forward-looking statements, and explanations of non-GAAP financial measures Conference Call Information 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] Forward-Looking Statements 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] - Key risks mentioned include changes in customer orders, manufacturing volatility, supply chain disruptions, and reliance on a small number of customers[7] Non-GAAP Financial Measures Explanation 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][9] - Management believes these non-GAAP measures provide better comparability with past performance and peer companies[9] - 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]