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Friday, 05/12/2017 12:30:43 PM

Friday, May 12, 2017 12:30:43 PM

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Very good Q1 2017 report no matter what metric you choose to evaluate it. Inventories increased a bit (nitpicky) but cash, debt and most importantly revenue/net income all improved. Was hoping for a pull back in price after last Friday's big day for a purchase. Not happening. Sold a few May 60 putts last week.

Some CEO and CFO statements:

Revenue grew 91% over Q1 of last year to reach a record $96.2 million. Demand for our market-leading datacenter products continues to drive our exciting result this quarter. Datacenter revenue more than doubled over last year and represents our eighth consecutive quarter of record revenue.

We achieved another record non-GAAP gross margin of 43.2%, driven by continued improvement in our manufacturing process and favorable product mix.

Total revenue for the first quarter grew 91% year-over-year to reach another record $96.2 million. This was primarily driven by continued demand for our market-leading datacenter products. Datacenter revenue in the first quarter grew 104% year-over-year to reach $79.6 million or 82.7% of our Q1 revenue

AOI mainly focuses on long-reach and long-reach light transceivers, those having transmission distances of 150 meters to 2 kilometers. And there are 2 types of technologies used for long-reach transmission, parallel single mode, PSM; and CWDM. Hyperscale datacenter operators will generally use a combination of PSM and CWDM transceivers within the datacenter. And when evaluating which of these 2 technologies to deploy, they consider the cost of the transceiver as well as the cost of the fiber cable. PSM uses 8 fibers total, 4 for transmit and 4 for receive, which makes this type of fiber cable significantly more expensive compared to the 2-fiber cable used in CWDM solutions

CWDM products generally have higher gross margins than PSM due to our advanced design and manufacturing capabilities for these products

During the quarter, we had design wins with 3 new datacenter customers.

Based on current orders and forecasts from our customers, we believe that 2017 datacenter revenue should grow by more than 85% compared with 2016 and would include contributions from 3 hyperscale datacenter customers, each of whom will represent more than 10% of our annual revenue.

For the quarter, 83% of our revenue was from datacenter products, 14% from CATV products,

We expect Q2 revenue to be between $106 million and $112 million, representing 92% to 103% year-over-year growth. We expect Q2 non-GAAP gross margin to be in the range of 41% to 42.5%. Non-GAAP net income is expected to be in the range of $22.2 million to $24.3 million and non-GAAP EPS between $1.09 per share and $1.19 per share using a weighted average fully diluted share count of approximately 20.4 million shares.

Analyst Question:
Paul Jonas Silverstein, Cowen and Company, LLC, Research Division--
All right. And then, along the same lines, the 3 big Web 2.0 folks, Amazon, Facebook and Microsoft, 2 of them were 10% customers this quarter. I recognize you don't want to go too far into detail on any one of them. But if I can ask you generically in terms of one of them being less than 10%, is that just the vagaries of rollouts? Any insight you can share in terms of what's going on with that

Stefan J. Murry, Applied Optoelectronics, Inc. - CFO and Chief Strategy Officer
Sure. It's very much the same as we said last quarter, that there are some rollout vagaries, as you put it, that are occurring there. We believe very strongly that we have not lost market share with this customer. That it's just overall kind of a slow time for them in their deployments as they get ready to gear up 100 gig. And we expect them to grow in the future. And again, I don't think we've lost any share.


NVDA also reported strong data center revenues; we are in the right sector this year. How long will it last? My biggest concern is that 3 customers account for 75% of all data center revenues.
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