Slide 1: Investor Presentation Fourth Quarter 2022
Investor Presentation Fourth QUARTER 2022 Nasdaq: AAOI APPLIED OPTOELECTRONICS
Slide 2: Safe Harbor Statement
S A F E H A R B O R S T AT E M E N T This presentation contains forward-looking statements. The statements contained in this presentation that are not purely historical are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Secur
Slide 3: Investment Highlights
Investment HIGHLIGHTS A Leader in Dynamic Marquee Proprietary Diversifying Advanced Optics Markets Customers Manufacturing Customer Base 3 APPLIED OPTOELECTRONICS
Slide 4: A leading provider of optical access products that enable the gigabit age
A leading provider of optical access products that enable the gigabit age 4 APPLIED OPTOELECTRONICS
Slide 5: Q4 2022 Highlights and Q1 2023 Outlook
Q4 2022 Highlights and Q1 2023 Outlook Highest Quarterly CATV Revenue in Company’s History • Revenue of $61.6 million, up 13% y/y, in-line with guidance range Q4 2022 Revenue Breakdown • Non-GAAP Gross Margin of 21.4% vs. 17.6% in Q4 2021, above guidance range • Increase in gross margin was driven m
Slide 6: Transaction Overview
Transaction Overview AOI ANNOUNCED DEFINITIVE AGREEMENT TO SELL ITS CHINESE MANUFACTURING FACILITIES AND CERTAIN ASSETS RELATED TO ITS TRANSCEIVER BUSINESS FOR $150 MILLION AOI announced on September 15, 2022 that it has entered into a definitive agreement with Yuhan Optoelectronic Technology (Shang
Slide 7: Bandwidth Demand Drives Revenue
Bandwidth Demand Drives Revenue $400 Devices DATA $350 CENTER $300 11%* CAGR Video CATV $250 $200 $150 Cloud TELECOM $100 $50 Social $0 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 FTTH ANNUAL REVENUE ($M) * CAGR calculated from 2013 through 2022. 7 APPLIED OPTOELECTRONICS
Slide 8: Four End-Markets With Strong Demand Drivers
Four End-Markets With Strong Demand Drivers DOCSIS 3.1 & upgrade cycle Cable Television International market opportunities Continued outsourcing of design and production Increasing size of datacenters Datacenter Higher-speed interconnect - 1G to (10G/40G/100G/200G/400G) Continuous need to expand, re
Slide 9: Growth Expected in Datacenter Market
Growth Expected in Datacenter Market Total High-Speed (100G or greater) Market to Exceed $11 Billion in 2023 33% 400G CAGR 2021-2025 $16,000 $14,000 Revenue ($m) $12,000 $10,000 $8,000 $6,000 $4,000 $2,000 $0 2020 2021 2022 2023 2024 2025 2026 100G 200G 400G 600G 800G © 2021 Omdia 9 • Source: High-S
Slide 10: Vertical Integration & In-house Manufacturing Optimal
DATAC E N T E R M A R K E T C H A R AC T E R I S T I C S D I F F E R F R O M CHARACTERISTICS OF TELECOM OPTICAL COMPONENT MARKET Vertical Integration & In-house Manufacturing Optimal DATACENT ER M A R KET TELECOM MARKET Rapid product development cycles favor controlling a Telecom applications have m
Slide 11: 100G Datacenter Transceiver Use Cases
100G Datacenter Transceiver Use Cases 100G Technology Lasers # Fibers Transceiver Fiber Cost/m* Optimal Distance Cost* (d) Short-Reach (SR) AOC 4xVCSEL 8 $ $ <150m Intra-Datacenter Long-Reach, PSM-4 4x1310-nm DFB (AOI) OR 8 $ $$$ 150m<d<500m 1x1310-nm high power + modulators (SiPh) Long-Reach, C
Slide 12: 400G: Multiple Standards to Meet Multiple Use Cases
400G: Multiple Standards to Meet Multiple Use Cases 400G intra-datacenter electrical/optical standards currently in existence or being developed: Reach Distance Data Center Unique Spec IEEE Standards 100G single Lambda MSA - 400G SR8* - 70m for OM3, 100m for OM4 - 400G SR4.2 - - 100G DR* - 500m - 40
Slide 13: Current 400G Transceiver Form-factors
C u r r e n t 4 0 0 G Tr a n s c e i v e r F o r m - f a c t o r s Considerations for Designers: QSFP-DD OSFP COBO SFP-DD Backward Compatibility Connector Termination Dimensions (mm) SFP-DD QSFP-DD OSFP COBO Latch Mechanism Width 14 19 22.93 36 Mating Process Length (overall) 64.15 93 100.4 40 Protr
Slide 14: 5G Requirements for Front/Mid-Haul Optics
5 G Re q u i r e m e n t s f o r Fr o n t / M i d - H a u l O p t i c s Small-Cell Proliferation and C-RAN Evolution Is Expected to Create Need for New Optical Solutions 25 Gbps/50 Gbps/100 Gbps transceivers needed Front-Haul: Mid-Haul: TELECOM MARKET • Link remote radio head (RRH) to base station •
Slide 15: Vertical Integration
Faster time to market Cost advantages Vertical Integration High yield manufacturing A K E Y D I F F E R E N T I AT O R Flexible capacity support Rapid response to customer & market demand APPLIED OPTOELECTRONICS
Slide 16: A Closer Look…
A Closer Look… CRYSTAL GROWTH LIGHT ENGINE AUTOMATION (Epitaxy) ASSEMBLY AOI’s Differentiation: AOI’s Differentiation: AOI’s Differentiation: Combination of proprietary Custom-designed and proprietary Robust silicon optical bench MBE and MOCVD processes production machinery platform technology lever
Slide 17: Automated Manufacturing Process
Automated Manufacturing Process Automated Receiver Sub- CRYSTAL GROWTH Assembly Decreased Labor by LIGHT ENGINE (Epitaxy) 58% and Improved Quality ASSEMBLY Control Automated Light Engine Final Automated Robotic Test Assembly Decreased Labor by Stations Increase Throughput, 85% and Improved Process D
Slide 18: Vertical Integration replicated across markets
Vertical Integration In-house production and development of advanced laser diodes and light replicated across markets engines speeds time to market DATA CATV CENTER FTTH TELECOM SUBSYSTEM EQUIPMENT MODULES/TRANSCEIVERS OPTICAL PACKAGED DEVICES OPTICAL SUBASSEMBLY CHIPS PROCESSED WAFER EPITAXY WAFER
Slide 19: Research & Development, Manufacturing locations
LOCATION MANUFACTURING R&D • CATV Equipment Ningbo, China • Laser & Detector packaging 1,463 Employees* • Light Engine • Transceivers LOCATION MANUFACTURING R&D LOCATION MANUFACTURING R&D • Wafer Fab Houston, TX • Laser chips • Laser packaging • Laser Packaging Taipei, Taiwan • Light Engine 301 Empl
Slide 20: Financial Review
Financial Review 20 APPLIED OPTOELECTRONICS
Slide 21: CATV Drives Revenue
CATV Drives Revenue ANNUAL REVENUE BY END MARKET CATV Data Center FTTH & Other IN MILLIONS $382.3 $ * $260.7 $268.4 $235.1 ** $222.8 $211.6 $190.9 2016 2017 2018 2019 2020 2021 2022 YOY GROWTH 37% 47% (30)% (29)% 23% (10)% 5% * Reflects a $900 thousand credit issued to a customer, which is adjusted
Slide 22: Recent Financial Performance
Recent Financial Performance Q U A R T E R LY R E V E N U E B Y E N D M A R K E T CATV Data Center FTTH & Other IN MILLIONS $ $61.6 $54.4 $56.7 * $52.2 $52.3 $53.5 Q4 2021 Q1 2022 Q2 2022 Q3 2022 Q4 2022 Q1 2023 E 22 * Reflects midpoint of Q1 2023 guidance of $52 million to $55 million provided in Q
Slide 23: Q4/22 Results
$ Q4/22 IN MILLIONS EXCEPT % TOTAL REVENUE $ 61.6 Q4/22 CATV $ 38.2 DATACENTER $ 16.5 TELECOM $ 6.4 Q4/22 Results GROSS MARGIN 21.4% OPERATING LOSS $ 7.9 NON-GAAP* NET LOSS $ 5.4 CASH** $ 35.6 23 * Please refer to the Safe Harbor statement on the use of Non-GAAP metrics, as well as the attached GAAP
Slide 24: Balance Sheet Highlights
Balance Sheet Highlights $ IN MILLIONS S I L I C O N P H O T O N I C12/31/2021 12/31/2020 S 12/31/2022 CASH(1) $50 $41 $36 WORKING CAPITAL(2) $106 $85 $45 PROPERTY, PLANT & $253 $243 $210 EQUIPMENT, NET TOTAL ASSETS $481 $454 $408 TOTAL DEBT(3) $68 $63 $69 STOCKHOLDERS’ EQUITY $278 $255 $185 (1) Cas
Slide 25: Investment Summary
Investment SUMMARY A leader In Focus on fast Marquee global Extensive internally Manufacturing Operating model Advanced Optics growing markets customers developed technology expertise creates provides significant including hyperscale differentiation & leverage datacenters sustains margin 25 APPLIED
Slide 26: Questions
Questions 26 APPLIED OPTOELECTRONICS
Slide 27: Appendix
Appendix APPLIED OPTOELECTRONICS
Slide 28: Management Team
MANAGEMENT TEAM Dr. Thompson Lin Dr. Stefan Murry FOUNDER, PRESIDENT & CEO CFO & CSO 27+ YEARS 27+ YEARS Dr. Alex Anselm Yidong Zhang Dr. Fred Chang SEMICONDUCTOR PRODUCTS CORPORATE CONTROLLER Joshua Yeh COMPONENT BU HEAD DIVISION HEAD ASIA GM 22+ YEARS 24+ YEARS 18+ YEARS 18+ YEARS 28 APPLIED OPTOE
Slide 29: Non-GAAP Financial Measures
NON-GAAP FINANCIAL MEASURES We provide non-GAAP gross margin, non-GAAP net income (loss), and non-GAAP earnings per share to eliminate the impact of items that we do not consider indicative of our overall operating performance. To arrive at our non-GAAP gross margin, we exclude stock-based compensat
Slide 30: Non-GAAP Reconciliation
N O N - G A A P R E C O N C I L I AT I O N Applied Optoelectronics, Inc. GAAP to Non-GAAP Reconciliation (In thousands) Preliminary Unaudited 1Q21 2Q21 3Q21 4Q21 CY2021 1Q22 2Q22 3Q22 4Q22 CY2022 GAAP revenue 49,701 54,189 53,267 54,408 211,565 52,242 52,299 56,693 61,584 222,818 Non-recurring custo
Slide 31: Non-GAAP Reconciliation
N O N - G A A P R E C O N C I L I AT I O N Applied Optoelectronics, Inc. GAAP to Non-GAAP Reconciliation (In thousands) Preliminary Unaudited 1Q21 2Q21 3Q21 4Q21 CY2021 1Q22 2Q22 3Q22 4Q22 CY2022 GAAP operating income (loss) (14,038) (13,649) (15,453) (13,626) (56,766) (14,239) (12,899) (13,496) (18