Applied Optoelectronics(AAOI) - 2025 Q1 - Quarterly Report

Financial Performance - Revenue for Q1 2025 reached $99,859,000, a 145.5% increase from$ 40,673,000 in Q1 2024[104] - Gross profit for Q1 2025 was $30,544,000, representing a gross margin of 30.6%, compared to$ 7,591,000 and 18.7% in Q1 2024[104] - The company reported a net loss of $9,172,000 in Q1 2025, an improvement from a net loss of$ 23,170,000 in Q1 2024[104] - Net loss decreased by $13.998 million or 60.4% for the three months ended March 31, 2025 compared to the same period in 2024, resulting in a net loss of$ 9.2 million[122] - Comprehensive loss decreased by $15.5 million or 62.2% for the three months ended March 31, 2025 compared to the same period in 2024[123] Revenue Sources - CATV revenue surged by$ 55.8 million, or 638.3%, in Q1 2025 due to a major network upgrade project by a North American MSO customer[108] - The top ten customers accounted for 97% of revenue in Q1 2025, up from 92% in Q1 2024, highlighting the need for customer base diversification[109] Cost and Expenses - Cost of goods sold in Q1 2025 was $69,315,000, representing 69.4% of revenue, down from 81.3% in Q1 2024[110] - Cost of goods sold increased by$ 36.2 million or 109.5% for the three months ended March 31, 2025 compared to the same period in 2024[111] - Total operating expenses increased by $10.2 million or 35.0% for the three months ended March 31, 2025 compared to the same period in 2024, with research and development expenses rising by$ 6.1 million or 52.1%[113][114] - Operating expenses totaled $39,481,000 in Q1 2025, with research and development expenses at$ 17,810,000, or 17.8% of revenue[104] Cash Flow and Financing - As of March 31, 2025, the company had $66.8 million in cash, cash equivalents, and restricted cash, with$ 29.4 million of unused borrowing capacity[125] - Net cash used in operating activities was $50.9 million for the three months ended March 31, 2025, primarily due to an increase in accounts receivable of$ 54.3 million[132] - Net cash used in investing activities was $36.3 million for the three months ended March 31, 2025, mainly for the purchase of additional plant, machinery, and equipment[133] - Net cash provided by financing activities was$ 70.0 million for the three months ended March 31, 2025, due to net proceeds from the ATM Offering[134] - The company issued $80.2 million of 5.25% convertible senior notes due in 2026, with an outstanding principal amount of$ 3.5 million remaining as of March 31, 2025[136] - The company issued $125.0 million of 2.75% convertible senior notes due 2030, maturing on January 15, 2030[137] Manufacturing and Production - The company operates three manufacturing sites in Texas, China, and Taiwan, with a focus on maintaining domestic production capacity[98] - The vertically integrated manufacturing model allows for rapid product development and greater control over quality and costs[94] - Construction costs for the new factory in Ningbo, China, are estimated at approximately$ 27.5 million, with $27.4 million paid as of March 31, 2025[138] - The company anticipates additional expenses for building improvements to the factory, with full service expected in 2025[138] Future Outlook - The company expects increased demand for 100G data center products through the end of 2025, supported by a supply agreement with Microsoft[106] - Future capital requirements will depend on growth rate, R&D spending, and market acceptance of products[140] - The company may explore additional liquidity sources, including issuing equity or debt securities, incurring secured indebtedness, or selling assets[142] Market Conditions - No material changes in market risk exposure have been noted since December 31, 2024, regarding currency exchange and interest rates[148] - The annual inflation rate in the US decreased to 2.9% in 2024 from 3.4% in 2023, while Taiwan's inflation rate fell to 2.1% from 2.7%[144]