Slide 1: Investor Presentation First Quarter 2021
Investor Presentation Fir st QUARTER 2021 Nasdaq: AAOI APPLIED OPTOELECTRONICS
Slide 2: Safe Harbor Statement
S A F E H A R B O R S TAT E M E NT 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 Securit
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: Q1 2021 Highlights
Q1 2021 Highlights • Revenue of $49.7 million, up from $40.5 million in Q1 2020 • Datacenter revenue decreased 22% year-over-year • 100G revenue decreased 13% year-over-year • CATV revenue grew 341% year-over-year, highest quarter since Q3 2017 • Telecom revenue grew 75% year-over-year • Non-GAAP Gr
Slide 6: Bandwidth Demand Drives Revenue
Bandwidth Demand Drives Revenue $400 Devices DATA $350 CENTER $300 14%* CAGR Video CATV $250 $200 $150 Cloud TELECOM $100 $50 Social $0 2012 2013 2014 2015 2016 2017 2018 2019 2020 FTTH ANNUAL REVENUE ($M) * CAGR calculated from 2012 through 2020. 6 APPLIED OPTOELECTRONICS
Slide 7: Four End-Markets With Strong Demand Drivers
Four End-Markets With Strong Demand Drivers Increasing size of datacenters Datacenter Higher-speed interconnect - 1G to (10G/40G/100G/200G/400G) Continuous need to expand, refresh and replenish DOCSIS 3.1 & upgrade cycle Cable Television International market opportunities Continued outsourcing of de
Slide 8: Growth Expected in Datacenter Market
Growth Expected in Datacenter Market Total High-Speed (100G or greater) Market to Exceed $6 Billion IN MILLIONS Older Generation Products Continue to Sell IN MILLIONS $ $ 72% 400G CAGR 700 7 2019-2025 6 600 ≥100G CAGR 5 16% 2019-2025 500 4 400 3 300 2 200 1 100 0 0 2019 2020 2021 2022 2023 2024 2025
Slide 9: Vertical Integration & In-house Manufacturing Optimal
DATACENTER MA RK E T CH A RACTE RIS TI CS D I FFE R FROM CHARACTERISTICS OF TELECOM OPTICAL COMPONENT MARKET Vertical Integration & In-house Manufacturing Optimal DATACENTER MA RKET TELECOM MARKET Rapid product development cycles favor controlling a Telecom applications have much longer production s
Slide 10: 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 11: 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 12: 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 13: 5G Requirements for Front/Mid-Haul Optics
5 G R e q u i r e m e n t s f o r Fr o n t / Mi d - H au 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 14: 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 15: 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 16: 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 17: 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 18: Research & Development, Manufacturing & Operations
LOCATION MANUFACTURING R&D • CATV Equipment Ningbo, China • Laser & Detector packaging 1,107 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 452 Empl
Slide 19: Financial Review
Financial Review 19 APPLIED OPTOELECTRONICS
Slide 20: Data Center Drives Revenue
Data Center Drives Revenue ANNUAL REVENUE BY END MARKET Data Center CATV FTTH & Other IN MILLIONS $382.3 $ * $260.7 $268.4 ** $235.1 $189.9 $190.9 $130.4 2014 2015 2016 2017 2018 2019 2020 YOY GROWTH 66% 46% 37% 47% (30)% (29)% 23% * Reflects a $900 thousand credit issued to a customer, which is adj
Slide 21: 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 Data Center CATV FTTH & Other IN MILLIONS $ $76.6 $65.2 $52.8 $49.7 $54.0 * $40.5 Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021E 21 * Reflects midpoint of Q2 2021 guidance of $51 million to $56 million provided in Q1
Slide 22: Q1/21 Results
$ Q1/21 IN MILLIONS EXCEPT % TOTAL REVENUE $ 49.7 Q1/21 DATACENTER $ 25.9 TELECOM $ 4.5 CATV $ 18.6 Q1/21 Results GROSS MARGIN 24.6% OPERATING LOSS $ 8.4 NON-GAAP* NET LOSS $ 5.5 CASH** $ 49.3 22 * Please refer to the Safe Harbor statement on the use of Non-GAAP metrics, as well as the attached GAAP
Slide 23: Balance Sheet Highlights
Balance Sheet Highlights $ IN MILLIONS S I L I C O N P H O T O N I C 3/31/2020 3/31/2019 S 3/31/2021 CASH(1) $77 $63 $49 WORKING CAPITAL(2) $138 $87 $111 PROPERTY, PLANT & $243 $244 $248 EQUIPMENT, NET TOTAL ASSETS $491 $454 $476 TOTAL DEBT(3) $41 $63 $71 STOCKHOLDERS’ EQUITY $324 $257 $278 (1) Cash
Slide 24: Investments in Capacity & Vertical Integration
Investments in Capacity & Vertical Integration C A P I TA L E X P E N D I T U R E S IN MILLIONS Machinery & Equipment Building Other* $ $2 $5 $24 $16 $24 $1 $51 $18 $46 $2 $23 $19 $3 $16 $8 2016 2017 2018 2019 2020 2021E** 24 * Other category includes furniture and fixtures, computer equipment and s
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 25+ YEARS 25+ YEARS Dr. Alex Anselm Jessica Hung Dr. Fred Chang SEMICONDUCTOR PRODUCTS VP OF FINANCE & Joshua Yeh COMPONENT BU HEAD DIVISION HEAD CORPORATE CONTROLLER ASIA GM 2 0 + Y E AR S 2 2 + Y E AR S 1 4 + Y E
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 1Q19 2Q19 3Q19 4Q19 CY2019 1Q20 2Q20 3Q20 4Q20 CY2020 1Q21 GAAP revenue 52,719 43,411 46,084 48,658 190,872 40,467 65,222 76,608 52,326 234,623 49,701 Non-rec
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 1Q19 2Q19 3Q19 4Q19 CY2019 1Q20 2Q20 3Q20 4Q20 CY2020 1Q21 GAAP operating income (loss) (11,869) (13,828) (10,996) (12,054) (48,747) (17,794) (11,108) (6,779)