Applied Optoelectronics(US:AAOI)2023-11-08 16:00Financial Performance - Revenue for the three months ended September 30, 2023, was $62,547 thousand, representing a 10.3% increase from $56,693 thousand in the same period of 2022[115] - Gross profit margin for the three months ended September 30, 2023, was 32.3%, compared to 17.2% for the same period in 2022[115] - Net loss for the three months ended September 30, 2023, was $(8,953) thousand, or (14.2)% of revenue, compared to a net loss of $(15,627) thousand, or (27.6)% in the same period of 2022[115] - Comprehensive loss decreased by $14.2 million, or 59.4%, for the three months ended September 30, 2023, compared to the same period in 2022, mainly due to a reduction in net loss and foreign currency translation adjustments[135] Operating Expenses - Operating expenses for the three months ended September 30, 2023, totaled $26,860 thousand, which is 42.9% of revenue, compared to 41.0% in the same period of 2022[115] - Research and development expenses for the three months ended September 30, 2023, were $9,457 thousand, representing 15.0% of revenue, slightly down from 16.2% in the same period of 2022[115] - Sales and marketing expenses for the three months ended September 30, 2023, were $3,035 thousand, or 4.9% of revenue, compared to 4.2% in the same period of 2022[115] - General and administrative expenses for the three months ended September 30, 2023, were $14,368 thousand, which is 23.0% of revenue, up from 20.6% in the same period of 2022[115] Revenue Breakdown - Data Center revenue increased by 175.8% to $48,807 million for the three months ended September 30, 2023, compared to $17,697 million in the same period of 2022[118] - CATV revenue decreased by 67.2% to $10,268 million for the three months ended September 30, 2023, down from $31,260 million in the same period of 2022[118] - The top ten customers accounted for 96.1% of revenue for the three months ended September 30, 2023, up from 86.1% in the same period of 2022, indicating a high customer concentration risk[120] Cost of Goods Sold - Cost of goods sold decreased by 9.7% to $42,373 million for the three months ended September 30, 2023, compared to $46,944 million in the same period of 2022, primarily due to lower material costs[123] Other Income and Expenses - Total other income (expense), net for the three months ended September 30, 2023, was $(2,267) million, compared to $(2,131) million in the same period of 2022, reflecting a 6.3% increase in losses[128] - Interest income increased by 106.6% for the three months ended September 30, 2023, compared to the same period in 2022, driven by higher saving rates and balances[130] - Interest expense rose by $0.4 million, or 22.7%, for the three months ended September 30, 2023, due to higher average interest rates[130] - Other income increased by $0.2 million, or 36.7%, for the three months ended September 30, 2023, primarily due to reduced foreign exchange losses[130] Cash Flow and Financing - Net cash used in operating activities for the nine months ended September 30, 2023, was $9.5 million, with a net loss of $42.2 million after excluding non-cash items[144] - Net cash provided by financing activities for the nine months ended September 30, 2023, was $9.3 million, primarily due to net proceeds of $32.2 million from the ATM Offering[147] - The company sold approximately 4.5 million shares of common stock with an aggregate offering price of approximately $32.6 million under the current ATM Offering as of September 30, 2023[141] Tax and Regulatory Considerations - The effective tax rate for the company remained at 0% for the three and six months ended September 30, 2023, primarily due to changes in the valuation allowance on deferred tax assets[132] - The company is evaluating the potential impact of the CHIPS Act and the Inflation Reduction Act on its income tax expense but does not expect any impact for the 2023 tax year[133] Capital Expenditures and Future Outlook - The construction of a new factory in Ningbo, China, is estimated to cost approximately $27.5 million, with $27.4 million paid as of September 30, 2023[149] - The company anticipates additional expenses for building improvements to the new factory, with the factory expected to be operational in 2024[149] - Future capital requirements will depend on growth rate, R&D spending, and new product introductions[150] - The company is exploring additional sources of liquidity, including issuing equity or debt securities[153] Economic Environment - There is uncertainty regarding the ability to mitigate the effects of inflation on costs, which may impact sales margins and profitability[155] - The annual inflation rate in the US was 6.5% in 2022, with expectations of a decline in 2023[155]