Applied Optoelectronics, Inc. reports 103% Net Income decline in 2018 and 21.0 pp EBITDA Margin decline from 28.1% to 7.1%
02/21/2019 • About Applied Optoelectronics, Inc. (
$AAOI) • By InTwits
Applied Optoelectronics, Inc. reported 2018 financial results today. Overall the company's long term financial model is characterised by the following facts:
- EBITDA Margin is quite volatile: 7.1% in 2018, 28.1% in 2017, 14.3% in 2016, 12.0% in 2015, 8.7% in 2014
- Applied Optoelectronics, Inc. has high CAPEX intensity: 5 year average CAPEX/Revenue was 25.0%. At the same time it's a lot of higher than industry average of 7.4%.
- CAPEX is quite volatile: $1m in FY2018, $1m in FY2017, $0m in FY2016, $0m in FY2015, $0m in FY2014
- The company has unprofitable business model: ROIC is -2.7%
- It operates with medium-size leverage: Net Debt/EBITDA is 1.5x while industry average is -0.5x
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
The company's Revenue dropped on 30.0%. Annual revenue decline showed slowdown in 18Q4 - revenue dropped on 27.3%. Revenue decline was accompanies by EBITDA margin decline. EBITDA Margin dropped on 21.0 pp from 28.1% to 7.1% in 2018. During 2014-2018 EBITDA Margin topped in 2017 at 28.1%.
Gross Margin dropped on 10.7 pp from 43.5% to 32.8% in 2018. SG&A as a % of Revenue increased on 6.7 pp from 11.5% to 18.2% in 2018. During the last 5 years SG&A as a % of Revenue bottomed in 2017 at 11.5%.
Net Income margin dropped on 20.1 pp from 19.3% to -0.80% in 2018. During 2014-2018 Net Income margin topped in 2017 at 19.3%.
Investments (CAPEX, working capital and M&A)
In 2018 Applied Optoelectronics, Inc. had CAPEX/Revenue of 26.9%. The company's CAPEX/Revenue decreased on 3.2 pp from 30.1% in 2015 to 26.9% in 2018. It's average level of CAPEX/Revenue for the last three years was 21.1%. Battling declining revenue Applied Optoelectronics, Inc. made large investments to CAPEX (380% of EBITDA) but that didn't help at least in this year. During 2014-2018 CAPEX as a % of Revenue bottomed in 2017 at 17.5%.
Return on investment
The company operates at negative ROIC (-2.7%) and ROE (-0.6%). ROIC dropped on 28.9 pp from 26.3% to -2.7% in 2018. ROE dropped on 27.0 pp from 26.4% to -0.65% in 2018. During 2014-2018 ROIC topped in 2017 at 26.3%. During the last 5 years ROE topped in 2017 at 26.4%.
Leverage (Debt)
Company's Net Debt / EBITDA is 1.5x and Debt / EBITDA is 4.4x. Net Debt / EBITDA jumped on 1.8x from -0.3x to 1.5x in 2018. Debt surged on 69.5% while cash dropped on 32.9%.
Applied Optoelectronics, Inc. has no short term refinancing risk: cash is higher than short term debt (235.9%).
Management team
Applied Optoelectronics, Inc.'s CEO is Chih-Hsiang Lin "Thompson". Chih-Hsiang Lin "Thompson" is a founder and has 11 years tenure with the company. Stefan J Murry is a the company's CFO. Stefan J Murry has spent 5 years at the company.
Financial and operational results
FY ended 12/31/2018
Applied Optoelectronics, Inc. ($AAOI) key annual financial indicators| mln. $ | 2014 | 2015 | 2016 | 2017 | 2018 | 2018/2017 |
|---|
P&L
|
|---|
| Revenue | 130.4 | 189.9 | 260.7 | 382.3 | 267.5 | -30.0% |
| Gross Profit | 44.2 | 60.5 | 87.0 | 166.3 | 87.8 | -47.2% |
| SG&A | 23.1 | 26.2 | 32.2 | 44.0 | 48.6 | 10.6% |
| EBITDA | 11.3 | 22.9 | 37.2 | 107.3 | 18.9 | -82.4% |
| Net Income | 4.3 | 10.8 | 31.2 | 74.0 | -2.1 | -102.9% |
Balance Sheet
|
|---|
| Cash | 32.2 | 28.1 | 50.2 | 82.9 | 55.6 | -32.9% |
| Short Term Debt | 9.6 | 30.9 | 7.9 | 0.6 | 23.6 | 4,119.9% |
| Long Term Debt | 19.1 | 34.0 | 35.0 | 49.0 | 60.3 | 23.2% |
Cash flow
|
|---|
| Capex | 41.1 | 57.1 | 49.4 | 67.0 | 71.9 | 7.3% |
Ratios
|
|---|
| Revenue growth | 66.3% | 45.6% | 37.3% | 46.6% | -30.0% | |
| EBITDA growth | 264.7% | 102.3% | 62.7% | 188.5% | -82.4% | |
|
|---|
| Gross Margin | 33.9% | 31.8% | 33.4% | 43.5% | 32.8% | -10.7% |
| EBITDA Margin | 8.7% | 12.0% | 14.3% | 28.1% | 7.1% | -21.0% |
| SG&A, % of revenue | 17.7% | 13.8% | 12.3% | 11.5% | 18.2% | 6.7% |
| Net Income Margin | 3.3% | 5.7% | 12.0% | 19.3% | -0.8% | -20.1% |
| CAPEX, % of revenue | 31.5% | 30.1% | 19.0% | 17.5% | 26.9% | 9.3% |
|
|---|
| ROIC | 4.4% | 7.2% | 9.2% | 26.3% | -2.7% | -28.9% |
| ROE | 4.8% | 7.7% | 15.9% | 26.4% | -0.6% | -27.0% |
| Net Debt/EBITDA | -0.3x | 1.6x | -0.2x | -0.3x | 1.5x | 1.8x |
Applied Optoelectronics, Inc. ($AAOI) key quoterly financial indicators
| mln. $ | 18Q1 | 18Q2 | 18Q3 | 18Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 65 | 88 | 56 | 58 | | -32.2% | -25.2% | -36.6% | -27.3% |
| EBITDA | 9 | 16 | -2 | -4 | | -68.1% | -58.2% | -108.9% | -126.8% |
| Net Income | 2 | 8 | -4 | -9 | | -89.3% | -72.4% | -119.3% | -249.9% |
Balance Sheet
|
|---|
| Cash | 82 | 76 | 56 | 56 | | 37.8% | 1.8% | -20.5% | -32.9% |
| Short Term Debt | 3 | 3 | 8 | 24 | | -42.6% | -30.6% | 127.5% | 4,119.9% |
| Long Term Debt | 62 | 58 | 63 | 60 | | 161.8% | 153.7% | 68.3% | 23.2% |
Ratios
|
|---|
| Gross Margin | 39.6% | 38.6% | 31.1% | 18.2% | | -3.5% | -6.8% | -13.2% | -22.1% |
| EBITDA Margin | 14.0% | 18.5% | -3.7% | -7.6% | | -15.7% | -14.6% | -30.1% | -28.1% |
| Net Income Margin | 3.2% | 9.1% | -6.6% | -14.8% | | -17.3% | -15.6% | -28.4% | -21.9% |
Peers in Communications Equipment
Below you can find Applied Optoelectronics, Inc. benchmarking vs. other companies in Communications Equipment industry. It's shown for the period of 5 years for the key financial metrics. Each table has median value for all the companies in the industry together with individual financial data of the top-5 companies in the industry by particular financial metric.
Top companies by Revenue growth, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Ribbon Communications Inc. ($RBBN) | | | | 30.6% | 75.2% |
| Extreme Networks, Inc. ($EXTR) | | 6.4% | -4.4% | 13.2% | 64.4% |
| Optical Cable Corporation ($OCC) | | -11.3% | -12.2% | -0.8% | 37.0% |
| ParkerVision Inc ($PRKR) | | | 37,601.2% | -97.5% | 35.0% |
| Network-1 Technologies, Inc. ($NTIP) | | 34.6% | 292.9% | -74.7% | 34.4% |
| |
|---|
| Median (66 companies) | | -0.4% | 7.3% | 5.1% | 3.5% |
|---|
| Applied Optoelectronics, Inc. ($AAOI) | | 45.6% | 37.3% | 46.6% | -30.0% |
Top companies by Gross margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| F5 Networks, Inc. ($FFIV) | 82.1% | 82.7% | 83.1% | 83.1% | 83.3% |
| Radware Ltd. ($RDWR) | 82.1% | 82.4% | 81.8% | 81.3% | 82.2% |
| Radcom Ltd. ($RDCM) | 63.2% | 76.8% | 69.6% | 71.8% | 74.0% |
| Casa Systems, Inc. ($CASA) | | 70.8% | 69.1% | 73.4% | 73.4% |
| NetScout Systems, Inc. ($NTCT) | 78.7% | 79.2% | 65.6% | 70.2% | 72.4% |
| |
|---|
| Median (67 companies) | 42.4% | 44.0% | 43.9% | 41.0% | 41.2% |
|---|
| Applied Optoelectronics, Inc. ($AAOI) | 33.9% | 31.8% | 33.4% | 43.5% | 32.8% |
Top companies by EBITDA margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Network-1 Technologies, Inc. ($NTIP) | 35.5% | 33.7% | 50.6% | 37.8% | 42.8% |
| InterDigital, Inc. ($IDCC) | 50.8% | 58.1% | 73.6% | 67.3% | 41.9% |
| EchoStar Corporation ($SATS) | 25.7% | 39.7% | 40.3% | 38.1% | 37.4% |
| Ubiquiti Networks, Inc. ($UBNT) | 34.7% | 25.5% | 37.3% | 34.3% | 32.8% |
| Ituran Location and Control Ltd. ($ITRN) | 32.4% | 30.5% | 29.9% | 29.9% | 30.4% |
| |
|---|
| Median (65 companies) | 5.3% | 4.7% | 5.5% | 6.0% | 4.6% |
|---|
| Applied Optoelectronics, Inc. ($AAOI) | 8.7% | 12.0% | 14.3% | 28.1% | 7.1% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Resonant Inc. ($RESN) | | | 132.5% | 124.8% | 245.2% |
| ViaSat, Inc. ($VSAT) | 22.8% | 26.5% | 26.7% | 33.0% | 32.1% |
| EchoStar Corporation ($SATS) | 19.7% | 43.8% | 39.9% | 30.9% | 26.5% |
| Finisar Corporation ($FNSR) | 11.3% | 11.9% | 9.4% | 9.7% | 16.8% |
| Oclaro, Inc. ($OCLR) | 2.2% | 5.3% | 7.3% | 11.7% | 10.6% |
| |
|---|
| Median (65 companies) | 2.2% | 2.2% | 1.9% | 1.8% | 1.6% |
|---|
| Applied Optoelectronics, Inc. ($AAOI) | 31.5% | 30.1% | 19.0% | 17.5% | 26.9% |
Top companies by ROIC, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| F5 Networks, Inc. ($FFIV) | 33.9% | 40.8% | 43.1% | 46.9% | 47.9% |
| Ubiquiti Networks, Inc. ($UBNT) | 61.4% | 31.5% | 41.5% | 38.5% | 39.1% |
| Motorola Solutions, Inc. ($MSI) | -16.1% | 18.9% | 26.4% | 39.5% | 35.3% |
| Ituran Location and Control Ltd. ($ITRN) | 50.9% | 46.8% | 50.1% | 48.5% | 35.1% |
| Casa Systems, Inc. ($CASA) | | | 43.2% | 39.7% | 21.9% |
| |
|---|
| Median (70 companies) | 1.2% | 2.0% | 2.2% | 2.1% | 0.7% |
|---|
| Applied Optoelectronics, Inc. ($AAOI) | 4.4% | 7.2% | 9.2% | 26.3% | -2.7% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Extreme Networks, Inc. ($EXTR) | | | -2.2x | -1.5x | 7.1x |
| ViaSat, Inc. ($VSAT) | 3.4x | 2.5x | 3.2x | 2.5x | 5.8x |
| CommScope Holding Company, Inc. ($COMM) | 2.3x | 9.6x | 4.3x | 4.6x | 4.4x |
| Inseego Corp. ($INSG) | | | | | 3.9x |
| Finisar Corporation ($FNSR) | -0.3x | 0.2x | -0.5x | 1.6x | 3.8x |
| |
|---|
| Median (45 companies) | -0.8x | -0.8x | -0.9x | -0.8x | -0.3x |
|---|
| Applied Optoelectronics, Inc. ($AAOI) | -0.3x | 1.6x | -0.2x | -0.3x | 1.5x |
