Slide 1: Investor Presentation Second Quarter 2024
INVESTOR PRESENTATION SECOND QUARTER 2024 Nasdaq: AAOI
Slide 2: Forward Looking Statements & Non-GAAP Financial Measures
Forwar d Looking Statements & Non-GAAP Financial Measur es This presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. In some cases, you can identify forward-looking statements by terminology such as "believe," "may," "estimate,"
Slide 3: Industry and Market Data
Industr y and Mar ket Data The information contained herein includes information provided by third-parties, such as market research firms. None of the Company, its affiliates or any third-parties that provided information to the Company (i) guarantee the accuracy, completeness, timeliness or availab
Slide 4: Investment Highlights
A Leader in Advanced Optics INVESTMENT HIGHLIGHTS Dynamic Markets Marquee Customers Proprietary Manufacturing Diversifying Customer Base 4
Slide 5: A leading provider of optical access products that enable the gigabit age
A leading provider of optical access products that enable the gigabit age 5
Slide 6: Q2 2024 Highlights and Outlook
Q2 2024 Highlights and Outlook Q2 2024 Revenue Breakdown • Revenue of $43.3 million, in-line with our guidance range. 5% 2% • Revenue from 100G products increased 21% year-over-year, while revenue for 400G products 13% more than doubled in the same period. • Non-GAAP Gross Margin of 22.5% vs. 24.8%
Slide 7: Bandwidth Demand Drives Revenue
Bandwidth Demand Drives Revenue Devices $400 DATA CENTER $350 11%* CAGR $300 Video CATV $250 $200 $150 Cloud Telecom $100 $50 $0 Social FTTH 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 ANNUAL REVENUE ($M) 7 * CAGR calculated from 2013 through 2023.
Slide 8: Four End-Markets With Strong Demand Drivers
Four End-Markets With Strong Demand Drivers • DOCSIS 3.1 & 4.0 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/800G) • Continuo
Slide 9: Growth Expected in Datacenter Market
Growth Expected in Datacenter Market Total High-Speed (100G or greater) Market to Exceed $10 Billion in 2027 400G CAGR 27% 2021-2027 $12,000 $10,000 $8,000 Revenue ($m) $6,000 $4,000 $2,000 $- 2021 2022 2023 2024 2025 2026 2027 100G 200G 400G 800G Source: Omdia © 2022 Omdia • Source: High-speed (fro
Slide 10: Datacenter Market Characteristics Differ From Telecom Optical Component Market
DATACENTER MARKET CHARACTERISTICS DIFFER FROM CHARACTERISTICS OF TELECOM OPTICAL COMPONENT MARKET Vertical Integration & In-house Manufacturing DATACENTER MARKET TELECOM MARKET Rapid product development cycles favor Telecom applications have much longer controlling a substantial part of the producti
Slide 11: Current 400G Transceiver Form-factors
Current 400G Transceiver Form-factors 100G single Lambda Considerations for Designers: Reach Distance Data Center Unique Spec IEEE Standards MSA Backward Compatibility - 400G SR8* - 70m for OM3, Connector Termination 100m for OM4 - 400G SR4.2 - Latch Mechanism - 100G DR* - Mating Process 500m - 400G
Slide 12: 5G Requirements for Front/Mid-Haul Optics
5G Requirements for Front/Mid-Haul Optics 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: • Link remote radio head (RRH) to base station • Longer distances typical in C-RAN (Cloud-Rad
Slide 13: Vertical Integration
VERTICAL Faster time to market INTEGRATION Cost advantages High yield manufacturing A KEY Flexible capacity support D I F F E R E N T I AT O R Rapid response to customer & market demand 14
Slide 14: A Closer Look…
A Closer Look… CRYSTAL GROWTH LIGHT ENGINE AUTOMATION (Epitaxy) ASSEMBLY AOI’s Differentiation: AOI’s Differentiation: AOI’s Differentiation: Robust silicon optical bench Combination of proprietary Custom-designed and proprietary platform technology leveraged across MBE and MOCVD processes productio
Slide 15: A Closer Look…
A Closer Look… Automated Receiver Sub- Assembly Decreased Labor by 58% and Improved Quality Control Automated Robotic Test Automated Light Engine Final Stations Increase Assembly Decreased Labor Throughput, Decrease by 85% and Improved Human Error in Handling Process Control and Quality 16
Slide 16: Vertical Integration
Vertical Integration In-house production and development of advanced laser diodes and light engines replicated across markets speeds time to market DATA CENTER CATV Telecom FTTH SUBSYSTEM EQUIPMENT MODULES/TRANSCEIVERS OPTICAL PACKAGED DEVICES OPTICAL SUBASSEMBLY CHIPS PROCESSED WAFER EPITAXY WAFER
Slide 17: Research & Development, Manufacturing & Operations
LOCATION MANUFACTURING R&D • CATV Equipment Ningbo, China • Laser & Detector packaging 1,345 Employees* • Light Engine • Transceivers LOCATION MANUFACTURING R&D LOCATION MANUFACTURING R&D • Wafer Fab • Laser packaging Houston, TX • Laser chips Taipei, Taiwan • Light Engine • Laser Packaging • Silico
Slide 18: Financial Review
Financial Review 19
Slide 19: Financial Performance
Financial Performance ANNUAL REVENUE BY END MARKET CATV Data Center FTTH & Other $382.3 $268.4 * $235.1 ** $222.8 $217.6 $211.6 $190.9 2017 2018 2019 2020 2021 2022 2023 YOY GROWTH 47% (30)% (29)% 23% (10)% 5% (2)% * Reflects a $900 thousand credit issued to a customer, which is adjusted out of our
Slide 20: Recent Financial Performance
Recent Financial Performance QUARTERLY REVENUE BY END MARKET FTTH & Other Data Center CATV $62.5 $63.0* $60.5 $41.6 $43.3 $40.7 Q2 2023 Q3 2023 Q4 2023 Q1 2024 Q2 2024 Q3 2024E * Reflects midpoint of Q3 2024 guidance of $60 million to $66 million provided in Q2 2024 earnings press release on 8/6/24
Slide 21: Q2/24 Results
$ Q2/24 IN MILLIONS EXCEPT % TOTAL REVENUE $ 43.3 CATV $ 5.8 DATACENTER $ 34.4 TELECOM $ 2.4 Q2/24 Results GROSS MARGIN 22.5% NON-GAAP* OPERATING LOSS $ 16.2 NET LOSS $ 10.9 CASH** $ 16.1 22 *Please refer to the Safe Harbor statement on the use of Non-GAAP metrics, as well as the attached GAAP-non-G
Slide 22: Balance Sheet Highlights
Balance Sheet Highlights IN MILLIONS 6/30/2022 6/30/2023 6/30/2024 CASH(1) $41 $29 $16 WORKING CAPITAL(2) $65 $(43) $52 PROPERTY, PLANT & $224 $198 $198 EQUIPMENT, NET TOTAL ASSETS $435 $357 $348 TOTAL DEBT(3) $64 $46 $28 STOCKHOLDERS’ EQUITY $220 $163 $186 (1) Cash: Cash, cash equivalents, short-te
Slide 23: Investment Summary
A leader In Advanced Optics Focus on fast growing markets including hyperscale datacenters INVESTMENT Marquee global customers SUMMARY Extensive internally developed technology Manufacturing expertise creates differentiation & sustains margin Operating model provides significant leverage 24
Slide 24: Questions
QUESTIONS 25
Slide 25: Appendix
APPENDIX 26
Slide 26: Management Team
MANAGEMENT TEAM Dr. Thompson Lin Dr. Stefan Murry FOUNDER, PRESIDENT & CEO CFO & CSO 28+ YEARS 28+ YEARS Dr. Alex Anselm David Kuo Dr. Fred Chang SEMICONDUCTOR PRODUCTS GENERAL COUNSEL & CHIEF Joshua Yeh COMPONENT BU HEAD DIVISION HEAD COMPLIANCE OFFICER ASIA GM 23+ YEARS 25+ YEARS 16+ YEARS 19+ YEA
Slide 27: 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 28: Non-GAAP Financial Measures
NON-GAAP FINANCIAL MEASURES A reconciliation of our GAAP net income (loss), GAAP total gross profit, GAAP earnings (loss), and GAAP earnings (loss) per share for Q2 2024 and the first half of 2024 to our non-GAAP net income (loss), non-GAAP total gross profit, Adjusted EBITDA, and earnings (loss) pe
Slide 29: Non-GAAP Reconciliation
NON-GAAP RECONCILIATION Applied Optoelectronics, Inc. GAAP to Non-GAAP Reconciliation (In thousands) Preliminary Unaudited 2Q22 3Q22 4Q22 CY2022 1Q23 2Q23 3Q23 4Q23 CY2023 1Q 2024 2Q 2024 GAAP revenue 52,299 56,693 61,584 222,818 53,030 41,615 62,547 60,453 217,646 40,673 43,270 Non-recurring custom
Slide 30: Non-GAAP Reconciliation
NON-GAAP RECONCILIATION Applied Optoelectronics, Inc. GAAP to Non-GAAP Reconciliation (In thousands) Preliminary Unaudited 2Q22 3Q22 4Q22 CY2022 1Q23 2Q23 3Q23 4Q23 CY2023 1Q 2024 2Q 2024 GAAP other income (loss) (1,557) (2,131) (1,886) (7,398) (2,125) (971) (2,267) (9,326) (14,691) (1,524) 129 Loss