Applied Optoelectronics Inc (0HGV.L) reported QQ3 2024 revenue of $65.15 million, up 50.57% QoQ from Q2 2024 and 4.16% year over year. The quarter delivered a meaningful sequential revenue uptick, likely reflecting seasonal demand in fiber-optic networking products and continued customer activity in data-center solutions. Yet, profitability remained negative, with gross profit of $15.92 million and a gross margin of 24.43%, while operating income and net income printed at negative levels: operating loss of $16.55 million and net loss of $17.76 million, corresponding to an operating margin of -25.40% and net margin of -27.25%. EBITDA was -$10.82 million, underscoring ongoing cost discipline challenges in a subdued margin environment.
From a cash-flow perspective, operating cash flow was negative at -$14.44 million, contributing to a free cash flow of -$20.50 million for the quarter. The company supplemented liquidity through financing activities, which generated +$49.37 million largely via common stock issuance, lifting the cash balance at period end to $41.37 million. The balance sheet remains asset-rich but debt-laden: total assets of $409.97 million, total debt of $111.38 million, and net debt of $77.26 million. Retained earnings sit at a sizable negative $332.16 million, while total stockholders’ equity stands at $212.09 million, implying meaningful accumulated losses but a tangible equity base to support ongoing operations and potential dilution if further funding is required.
Overall, the QQ3 2024 results show revenue resilience on a QoQ basis but a continuation of profitability and cash-flow headwinds. Investors should weigh the near-term liquidity flexibility provided by equity financing against the ongoing need to scale revenue meaningfully and achieve margin expansion to convert cash burn into positive free cash flow.
Net Income and EPS
- Net income: -$17.76m; net margin: -27.25%
- EPS (diluted): -$0.42 per share
- YoY net income: -55.56%; QoQ: +36.36%
Cash Flow and Balance Sheet (selected)
- Operating cash flow: -$14.44m; free cash flow: -$20.50m
- Net cash from financing activities: +$49.37m; cash at end of period: $41.37m
- Total assets: $409.97m; total debt: $111.38m; net debt: $77.26m
- Current assets: $188.36m; current liabilities: $117.10m; current ratio: 1.61; quick ratio: 1.06; cash ratio: 0.35
- Retained earnings: -$332.16m; total stockholders’ equity: $212.09m; debt-to-equity: 0.57; cash-to-equity balance reflects a leveraged, loss-making business with a measured liquidity cushion from financing activity.
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
65.15M
4.16%
50.57%
Gross Profit
15.92M
-21.10%
68.22%
Operating Income
-16.55M
-147.49%
36.95%
Net Income
-17.76M
-98.34%
32.00%
EPS
-0.42
-55.56%
36.36%
Key Financial Ratios
currentRatio
1.61
grossProfitMargin
24.3%
operatingProfitMargin
-25.4%
netProfitMargin
-27.3%
returnOnAssets
-4.33%
returnOnEquity
-8.37%
debtEquityRatio
0.57
operatingCashFlowPerShare
$-0.34
freeCashFlowPerShare
$-0.49
priceToBookRatio
2.8
priceEarningsRatio
-8.35
Net Income vs. Revenue
Expense Breakdown
Management Commentary
Note on transcript: No earnings call transcript data was provided in the dataset for QQ3 2024. Consequently, there are no management quotes to quote or themes to cross-validate within the transcript. Pending access to the earnings call transcript, the following thematic areas would typically be pertinent: (1) liquidity and capital strategy, (2) milestones for product adoption and mix (e.g., data-center modules, lasers, transceivers), (3) cost containment and gross margin trajectory, and (4) guidance for the next quarter and full-year outlook.
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Forward Guidance
Forward guidance is not present in the provided data. In the absence of explicit targets, the implied trajectory hinges on: (a) sustaining revenue generation in the mid-60s million range with continued QoQ momentum, (b) narrowing operating losses through gross margin expansion (targeting a step-up from 24.4% toward higher teens/20s) and tighter OPEX (R&D and SG&A), and (c) improving free cash flow by converting additional operating cash flow into cash profitability or reducing working capital intensity. Key factors to monitor include: backlog and order activity in fiber-optic modules and related components, the pace of R&D investments, leverage and potential refinancing needs, and any capital-raising actions that could affect equity dilution.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
0HGV.L Focus
24.43%
-25.40%
-8.37%
-8.35%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
Overall, the QQ3 2024 results support a cautious, wait-and-see investment stance. The quarter shows revenue resilience with a robust QoQ rebound, but profitability remains fragile and cash generation is negative. The near-term equity financing used to bolster liquidity implies ongoing dilution risk if the company continues to incur losses. Investors should monitor: (1) signs of sustained gross margin expansion and a path to positive free cash flow, (2) improvement in working capital efficiency, (3) any forward-looking guidance or milestones from management, and (4) debt management or refinancing developments. In a scenario where revenue stabilizes in the mid-60s millions with margins improving toward the high teens to 20s and cash flow approaches break-even, the stock could re-rate modestly; otherwise, the risk of continued losses and financing dependence may keep the investment at the higher end of risk sensitivity in the technology/semi sector.
Key Investment Factors
Growth Potential
Moderate revenue growth potential driven by sustained data-center demand for fiber-optic networking products and possible expansion into turnkey equipment; near-termQoQ improvement in Q3 suggests some demand recovery, but long-term growth depends on margin expansion and scale in gross profit.
Profitability Risk
Primary risks include ongoing net losses, negative free cash flow, a leveraged balance sheet, and reliance on equity financing to fund operations. Competitive pressure in semiconductors and fiber-optic modules could compress margins further if demand softens. Absence of explicit guidance adds uncertainty to near-term planning.
Financial Position
Asset base is solid (total assets $410m) with a meaningful cash balance post-financing ($41.37m) but sizable debt ($111.38m) and negative retained earnings (-$332.16m) signal a history of losses. Current ratio of 1.61 provides some liquidity cushion, yet cash flow generation remains negative, underscoring the need for operating improvements or additional financing to sustain operations.
SWOT Analysis
Strengths
Gross margin around 24.4% demonstrates a relatively healthy product mix for a small-cap semiconductor supplier
Diverse product portfolio (optical modules, lasers, transmitters, transceivers, and turnkey equipment) with global reach
Visible QoQ revenue uptick in QQ3 2024 suggesting some near-term demand recovery
Solid asset base and ability to fund operations through financing activity (notably equity issuances)
Weaknesses
Sustained net losses and negative EBITDA indicate profitability challenges
Negative free cash flow and negative operating cash flow in QQ3 2024