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Acacia (ACIA) Beats on Q1 Earnings, Revenues Increase Y/Y
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Acacia Communications Inc. reported first-quarter 2017 non-GAAP earnings (including stock-based compensation) of 86 cents per share that comfortably beat the Zacks Consensus Estimate of 52 cents per share.
Excluding stock-based compensation, non-GAAP earnings of 77 cents increased 75% on a year-over-year basis. Earnings also exceeded the guided range of 63-70 cents per share.
Acacia reported revenues of $114.4 million, up a massive 35.7% year over year and ahead of the Zacks Consensus Estimate of $112 million. The figure was also marginally higher than the upper end of the guided range of $108-$114 million.
The year-over-year growth was driven by growing demand for the company’s flagship products, CFP and flex-400G.
However, unimpressive second-quarter guidance affected shares, which fell almost 15% following the results. The stock regained (almost 4%) some of its losses over the next trading session to close at $46.27 on May 11.
We note that the shares of the company have underperformed the Zacks Communication-Components industry on a year-to-date basis. While the industry gained 14.7%, the stock depreciated 25.1%.
Revenue Discussion
Revenues from newer customers surged approximately 223% year over year and accounted for 32% of revenues, up from 14% of revenues reported in the year-ago quarter.
During the first quarter of 2017, there was a sharp progress in the ramping of CFP2-ACO and CFP2-DCO products and customers seem to be strongly interested in the products.
Operating Details
Non-GAAP gross margin, which includes the impact of stock-based compensation expense, expanded 720 basis points (bps) from the year-ago quarter to 49.1%.
Balance Sheet
As of Dec 31, 2016, cash and cash equivalents were $139.6 million compared with $32.8 million a year ago.
Cash flow from operating activities was $15.9 million compared with $11.8 million in the year- ago quarter.
Guidance
Acacia expects second-quarter 2017 revenues in the range of $108–$114 million. Non-GAAP earnings are anticipated to be in the range of 22–35 cents per share for the quarter.
Revenues are expected to decline 21.7% sequentially, mostly due to softening demand from China.
Management stated that temporary slowdown in the deployment of carriers in China will hurt order rate. Once, the China market inventory overhang recedes and demand stabilizes, which the company expects to happen during the second half of the year, results will improve further.
The company also anticipates a rise in operating expense in the second quarter. This is because some outside silicon under repayment and some development payments are due with milestones for their 16-nanometer development process due in the second quarter.
Earnings growth rate for Applied Optoelectronics, Axcelis Technologies and Arista Networks is projected to be 20%, 20% and 20.43% respectively.
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Acacia (ACIA) Beats on Q1 Earnings, Revenues Increase Y/Y
Acacia Communications Inc. reported first-quarter 2017 non-GAAP earnings (including stock-based compensation) of 86 cents per share that comfortably beat the Zacks Consensus Estimate of 52 cents per share.
Excluding stock-based compensation, non-GAAP earnings of 77 cents increased 75% on a year-over-year basis. Earnings also exceeded the guided range of 63-70 cents per share.
Acacia reported revenues of $114.4 million, up a massive 35.7% year over year and ahead of the Zacks Consensus Estimate of $112 million. The figure was also marginally higher than the upper end of the guided range of $108-$114 million.
The year-over-year growth was driven by growing demand for the company’s flagship products, CFP and flex-400G.
Acacia Communications, Inc. Price and Consensus
Acacia Communications, Inc. Price and Consensus | Acacia Communications, Inc. Quote
However, unimpressive second-quarter guidance affected shares, which fell almost 15% following the results. The stock regained (almost 4%) some of its losses over the next trading session to close at $46.27 on May 11.
We note that the shares of the company have underperformed the Zacks Communication-Components industry on a year-to-date basis. While the industry gained 14.7%, the stock depreciated 25.1%.
Revenue Discussion
Revenues from newer customers surged approximately 223% year over year and accounted for 32% of revenues, up from 14% of revenues reported in the year-ago quarter.
During the first quarter of 2017, there was a sharp progress in the ramping of CFP2-ACO and CFP2-DCO products and customers seem to be strongly interested in the products.
Operating Details
Non-GAAP gross margin, which includes the impact of stock-based compensation expense, expanded 720 basis points (bps) from the year-ago quarter to 49.1%.
Balance Sheet
As of Dec 31, 2016, cash and cash equivalents were $139.6 million compared with $32.8 million a year ago.
Cash flow from operating activities was $15.9 million compared with $11.8 million in the year- ago quarter.
Guidance
Acacia expects second-quarter 2017 revenues in the range of $108–$114 million. Non-GAAP earnings are anticipated to be in the range of 22–35 cents per share for the quarter.
Revenues are expected to decline 21.7% sequentially, mostly due to softening demand from China.
Management stated that temporary slowdown in the deployment of carriers in China will hurt order rate. Once, the China market inventory overhang recedes and demand stabilizes, which the company expects to happen during the second half of the year, results will improve further.
The company also anticipates a rise in operating expense in the second quarter. This is because some outside silicon under repayment and some development payments are due with milestones for their 16-nanometer development process due in the second quarter.
Zacks Rank & Key Picks
Acacia has a Zacks Rank #4 (Sell).
Better-ranked stocks include Applied Optoelectronics, Inc (AAOI - Free Report) , Axcelis Technologies, Inc. (ACLS - Free Report) , and Arista Networks, Inc. (ANET - Free Report) , all sporting Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Earnings growth rate for Applied Optoelectronics, Axcelis Technologies and Arista Networks is projected to be 20%, 20% and 20.43% respectively.
Sell These Stocks. Now.
Just released, today's 220 Zacks Rank #5 Strong Sells demand urgent attention. If any are lurking in your portfolio or Watch List, they should be removed immediately. These are sinister companies because many appear to be sound investments. However, from 1988 through 2016, stocks from our Strong Sell list have actually performed 6X worse than the S&P 500. See today's Zacks "Strong Sells" absolutely free >>.