Alliance Fiber Optic Products, Inc. (Nasdaq:AFOP), an innovative
supplier of fiber optic components, subsystems and integrated
modules for the fiber optic communication market, today reported
its financial results for the second quarter ended June 30, 2014.
Revenues for the second quarter of 2014 were $24,199,000, a 27%
increase from revenues of $19,039,000 reported in the second
quarter of 2013, and a 3% decrease from revenues of $24,882,000
reported in the first quarter of 2014.
Net income for the quarter ended June 30, 2014, was $3,782,000,
or $0.20 per share, compared to net income of $4,282,000, or $0.24
per share, for the second quarter of 2013, and net income of
$5,015,000, or $0.27 per share, for the first quarter of 2014.
Included in net income for the second quarter of 2014 and the first
quarter of 2014 are income tax provision adjustments of $2,134,000
and $659,000 respectively, as a result of deferred income tax
expenses based on utilization of net operating loss. Excluding
these tax provision adjustments, net income in the second quarter
of 2014 increased to $5,916,000, or $0.32 per share, compared to
net income of $4,282,000, or $0.24 per share, for the second
quarter of 2013, and net income of $5,674,000 or $0.31 per share
for the first quarter of 2014.
Gross margin for the quarter ended June 30, 2014 increased to
40.1%, compared to 38.2% in the year ago quarter and 39.8% in the
first quarter of 2014. Operating margin for the quarter ended June
30, 2014 increased to 27.1%, compared to 23.4% in the year ago
quarter and 26.0% in the first quarter of 2014.
Non-GAAP net income for the quarter ended June 30, 2014
increased to $6,446,000, or $0.35 per share, compared to non-GAAP
net income of $4,693,000, or $0.27 per share, for the second
quarter of 2013, and non-GAAP net income of $6,391,000, or $0.35
per share, for the first quarter of 2014.
Non-GAAP gross margin for the quarter ended June 30, 2014 was
40.5%, compared to 38.9% in the year ago quarter and 40.6% in the
first quarter of 2014. Non-GAAP operating margin for the quarter
ended June 30, 2014 was 29.3%, compared to 25.5% in the year ago
quarter and 28.9% in the first quarter of 2014.
Peter Chang, President and Chief Executive Officer, commented,
"Although our second quarter revenues fell short of our previous
guidance, due to lower than expected demand from one key customer,
sales in the second quarter increased 27% from the year ago
quarter. We are encouraged by increased sales to our telecom
customers and European customers during the quarter. In addition,
our income from operations in the first six months of 2014 doubled
from the first six months of 2013."
"Regarding forward guidance, based on input from our customers
and current orders, we expect revenues in the third quarter to be
at a similar level to the secod quarter. Despite relatively flat
revenues in these three quarters, we continue being encouraged by
the prospect of emerging business growth in the coming years,
because of increasing data bandwidth demands driving the next
growth cycle in the fiber optics industry. In the meantime, we
expect to deliver record annual sales and profits in this fiscal
year," concluded Mr. Chang.
Conference Call
Management will host a conference call at 1:30 p.m. PT on July
28, 2014 to discuss AFOP's second quarter 2014 financial results as
well as the outlook for the third quarter of 2014. Please call
877-675-3572 at least ten minutes prior to the call in order for
the operator to connect you. The confirmation number for the call
is 71715763. AFOP will also provide a live webcast of its second
quarter 2014 conference call at AFOP's website: www.afop.com. The
webcast replay will be available on AFOP's website 90 minutes after
the live conference call.
About AFOP
Founded in 1995, Alliance Fiber Optic Products, Inc. designs,
manufactures and markets a broad range of high performance fiber
optic components and integrated modules. AFOP's products are used
by leading and emerging communications equipment manufacturers to
deliver optical networking systems to the long-haul, enterprise,
data center, metropolitan and last mile access segments of the
communications network. AFOP offers a broad product line of passive
optical components including interconnect systems, splitters, thin
film CWDM and DWDM components and modules, and optical attenuators.
AFOP is headquartered in Sunnyvale, California, with manufacturing
and product development capabilities in the United States, Taiwan
and China. AFOP's website is located at http://www.afop.com.
Except for the historical information contained herein, the
matters set forth in this press release, including statements as to
our expectations regarding future sales and profit levels and the
time periods thereof, our business prospects, demand for our
products and sources of demand, and our expectations for growth in
the fiber optic industry, are forward looking statements within the
meaning of the "safe harbor" provisions of the Private Securities
Litigation Reform Act of 1995. These forward-looking statements are
subject to risks and uncertainties that may cause actual results to
differ materially, including, but not limited to general economic
conditions and trends, trends in demand for bandwidth, the impact
of competitive products and pricing, timely introduction of new
technologies, timely design acceptance by our customers, the
acceptance of new products and technologies by our customers,
customer demand for our products, the timing of customer orders,
loss of key customers or customer orders, our ability to ramp new
products into volume production, the mix of products sold and
product pricing, the costs associated with running our operations,
industry-wide shifts in supply and demand for optical components
and modules, industry overcapacity and demand for bandwidth, our
ability to obtain and maintain operational efficiencies, financial
stability in foreign markets, and other risks detailed from time to
time in our SEC reports, including AFOP's Quarterly Report on Form
10-Q for the quarter ended March 31, 2014. These forward-looking
statements speak only as of the date hereof. AFOP disclaims any
intention or obligation to update or revise any forward-looking
statements.
ALLIANCE FIBER OPTIC
PRODUCTS, INC. |
Condensed Consolidated
Statements of Operations |
(In thousands, except per share
amounts) |
(Unaudited) |
|
|
|
|
|
|
|
Three Months Ended |
Six Months Ended |
|
Jun. 30, |
Mar. 31, |
Jun. 30, |
Jun. 30, |
Jun. 30, |
|
2014 |
2014 |
2013 |
2014 |
2013 |
|
|
|
|
|
|
Revenues |
$ 24,199 |
$ 24,882 |
$ 19,039 |
$ 49,081 |
$ 31,192 |
|
|
|
|
|
|
Cost of revenues |
14,504 |
14,968 |
11,759 |
29,472 |
19,504 |
Gross profit |
9,695 |
9,914 |
7,280 |
19,609 |
11,688 |
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
Research and development |
1,067 |
1,108 |
859 |
2,175 |
1,672 |
Selling, marketing and
administrative |
2,061 |
2,336 |
1,976 |
4,397 |
3,804 |
Total operating expenses |
3,128 |
3,444 |
2,835 |
6,572 |
5,476 |
|
|
|
|
|
|
Income from operations |
6,567 |
6,470 |
4,445 |
13,037 |
6,212 |
|
|
|
|
|
|
Interest and other income, net |
186 |
147 |
163 |
333 |
296 |
Net income before tax |
6,753 |
$ 6,617 |
$ 4,608 |
$ 13,370 |
$ 6,508 |
|
|
|
|
|
|
Benefit (provision) for income taxes |
(2,971) |
(1,602) |
(326) |
(4,573) |
(376) |
Net income |
$ 3,782 |
$ 5,015 |
$ 4,282 |
$ 8,797 |
$ 6,132 |
|
|
|
|
|
|
Net income per share: |
|
|
|
|
|
Basic |
$ 0.20 |
$ 0.27 |
$ 0.24 |
$ 0.48 |
$ 0.35 |
Diluted |
$ 0.20 |
$ 0.26 |
$ 0.23 |
$ 0.46 |
$ 0.34 |
|
|
|
|
|
|
Shares used in per share calculation: |
|
|
|
|
|
Basic |
18,533 |
18,422 |
17,498 |
18,478 |
17,344 |
Diluted |
19,230 |
19,070 |
18,414 |
19,116 |
18,118 |
|
|
|
|
|
|
Included in costs and expenses above: |
|
|
|
|
|
Stock based compensation charges |
|
|
|
|
|
Cost of revenue |
$ 115 |
$ 176 |
$ 64 |
$ 292 |
$ 99 |
Research and development |
64 |
83 |
46 |
147 |
79 |
Selling, marketing and
administrative |
351 |
458 |
301 |
808 |
513 |
Total |
$ 530 |
$ 717 |
$ 411 |
$ 1,247 |
$ 691 |
|
ALLIANCE FIBER OPTIC
PRODUCTS, INC. |
Condensed Consolidated
Balance Sheets |
(in thousands) |
(Unaudited) |
|
|
|
|
Jun. 30, |
Dec. 31, |
|
2014 |
2013 |
ASSETS |
|
|
Current assets: |
|
|
Cash and short-term
investments |
$ 55,961 |
$ 46,679 |
Accounts receivable, net |
14,914 |
11,566 |
Inventories |
9,198 |
10,630 |
Deferred tax asset |
3,243 |
6,036 |
Other current assets |
1,546 |
1,745 |
Total current assets |
84,862 |
76,656 |
|
|
|
Long-term investments |
10,543 |
10,453 |
Property and equipment, net |
14,547 |
13,258 |
Other assets |
180 |
198 |
Total assets |
$ 110,132 |
$ 100,565 |
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY |
|
|
Current liabilities: |
|
|
Accounts payable |
$ 11,386 |
$ 11,657 |
Accrued expenses and other
current liabilities |
8,595 |
7,134 |
Total current liabilities |
19,981 |
18,791 |
|
|
|
Long-term liabilities |
622 |
600 |
Total liabilities |
20,603 |
19,391 |
|
|
|
Stockholders' equity |
89,529 |
81,174 |
Total liabilities and
stockholders' equity |
$ 110,132 |
$ 100,565 |
|
ALLIANCE FIBER OPTIC
PRODUCTS, INC. |
Reconciliations from
GAAP to Non-GAAP |
(In thousands, except
per share amounts) |
(Unaudited) |
|
Three Months
Ended |
Six Months
Ended |
|
Jun. 30, |
Mar. 31, |
Jun. 30, |
Jun. 30, |
Jun. 30, |
|
2014 |
2014 |
2013 |
2014 |
2013 |
Gross Profit
Reconciliation |
|
|
|
|
|
GAAP gross profit |
$ 9,695 |
$ 9,914 |
$ 7,280 |
$ 19,609 |
$ 11,688 |
|
|
|
|
|
|
Stock-based compensation expense |
115 |
176 |
64 |
292 |
99 |
|
|
|
|
|
|
Adjusted (non-GAAP) gross profit |
$ 9,810 |
$ 10,090 |
$ 7,344 |
$ 19,901 |
$ 11,787 |
Adjusted (non-GAAP) gross margin |
40.5% |
40.6% |
38.9% |
40.6% |
37.8% |
|
|
|
|
|
|
Operating Expense
Reconciliation |
|
|
|
|
|
|
|
|
|
|
|
GAAP operating expenses |
$ 3,128 |
$ 3,444 |
$ 2,835 |
$ 6,572 |
$ 5,476 |
|
|
|
|
|
|
Stock-based compensation expense |
415 |
541 |
347 |
955 |
592 |
|
|
|
|
|
|
Adjusted (non-GAAP) operating expenses |
$ 2,713 |
$ 2,903 |
$ 2,488 |
$ 5,617 |
$ 4,884 |
|
|
|
|
|
|
Income from Operations
Reconciliation |
|
|
|
|
|
GAAP income from operations |
$ 6,567 |
$ 6,470 |
$ 4,445 |
$ 13,037 |
$ 6,212 |
|
|
|
|
|
|
Adjustments related to gross profit |
115 |
176 |
64 |
292 |
99 |
|
|
|
|
|
|
Adjustments related to operating expense |
415 |
541 |
347 |
955 |
592 |
|
|
|
|
|
|
Adjusted (non-GAAP) income from
operations |
$ 7,097 |
$ 7,187 |
$ 4,856 |
$ 14,284 |
$ 6,903 |
Adjusted (non-GAAP) operating margin |
29.3% |
28.9% |
25.5% |
29.1% |
22.1% |
|
|
|
|
|
|
Net
Income Reconciliation |
|
|
|
|
|
GAAP net income |
$ 3,782 |
$ 5,015 |
$ 4,282 |
$ 8,797 |
$ 6,132 |
|
|
|
|
|
|
Adjustments related to gross profit |
115 |
176 |
64 |
292 |
99 |
Adjustments related to operating expense |
415 |
541 |
347 |
955 |
592 |
Income tax provision adjustments |
2,134 |
659 |
-- |
2,793 |
-- |
Adjusted (non-GAAP) net income |
$ 6,446 |
$ 6,391 |
$ 4,693 |
$ 12,837 |
$ 6,823 |
|
|
|
|
|
|
Weighted average shares outstanding |
|
|
|
|
|
Basic |
18,533 |
18,422 |
17,498 |
18,478 |
17,344 |
Diluted |
19,230 |
19,070 |
18,414 |
19,116 |
18,118 |
|
|
|
|
|
|
Net Income per Common Share -
Basic: |
|
|
|
|
|
GAAP as reported |
$ 0.20 |
$ 0.27 |
$ 0.24 |
$ 0.48 |
$ 0.35 |
Non-GAAP as adjusted |
$ 0.35 |
$ 0.35 |
$ 0.27 |
$ 0.69 |
$ 0.39 |
|
|
|
|
|
|
Net Income per Common Share -
Diluted: |
|
|
|
|
|
GAAP as reported |
$ 0.20 |
$ 0.26 |
$ 0.23 |
$ 0.46 |
$ 0.34 |
Non-GAAP as adjusted |
$ 0.34 |
$ 0.34 |
$ 0.25 |
$ 0.67 |
$ 0.38 |
|
|
|
|
|
|
Non-GAAP EBITDA |
|
|
|
|
|
Non-GAAP net income |
$ 6,446 |
$ 6,391 |
$ 4,693 |
$ 12,837 |
$ 6,823 |
Depreciation expense |
707 |
684 |
468 |
1,391 |
921 |
Interest income |
(183) |
(178) |
(164) |
(361) |
(323) |
Income tax expense |
837 |
944 |
326 |
1,781 |
376 |
Non-GAAP EBITDA |
$ 7,807 |
$ 7,841 |
$ 5,323 |
$ 15,648 |
$ 7,797 |
Use of Non-GAAP Financial Information
The company provides Non-GAAP gross margin, Non-GAAP net income,
Non-GAAP basic and diluted net income per share and EBITDA, as
supplemental information. In computing these non-GAAP financial
measures, the company excludes certain items included under GAAP,
including stock-based compensation expense and income tax provision
adjustments. In computing EBITDA, the company also excludes
interest income, provision for (benefit from) income taxes and
depreciation expense.
Management uses these Non-GAAP financial measures to evaluate
the operating performance of the business and aid in the
period-to-period comparability. Management also uses the Non-GAAP
financial measures for planning and forecasting and measuring
results against its forecast. Using several measures to evaluate
the business allows the company and investors to assess the
company's relative performance. The Non-GAAP financial measures
provided herein may not provide information that is directly
comparable to that provided by other companies in the company's
industry, as other companies may calculate such financial results
differently. The company's Non-GAAP financial measures are not
measurements of financial performance under GAAP, and should not be
considered as alternatives to the financial measures derived in
accordance with GAAP. The company does not consider these Non-GAAP
financial measures to be a substitute for, or superior to, the
information provided by GAAP financial results. A reconciliation of
the Non-GAAP financial measures to the most directly comparable
GAAP financial measures is provided in the financial schedules
portion of this press release.
CONTACT: Keting Lin, IR Associate
Alliance Fiber Optic Products, Inc.
408-736-6900 x188
Email: klin@afop.com
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