News Column

AFOP Reports 27% Year Over Year Revenue Increase in Q2 2014

July 28, 2014

SUNNYVALE, Calif., July 28, 2014 (GLOBE NEWSWIRE) -- 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 EndedSix Months Ended
 Jun. 30,Mar. 31,Jun. 30,Jun. 30,Jun. 30,
 20142014201320142013
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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Source: Alliance Fiber Optic Products, Inc.


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