Slide 1: Investor Presentation First Quarter 2023
Investor Presentation Fir st QUARTER 2023 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 2023 Highlights and Q2 2023 Outlook
Q1 2023 Highlights and Q2 2023 Outlook • Revenue of $53 million, up 2% y/y, in-line with guidance range Q1 2023 Revenue Breakdown • Non-GAAP Gross Margin of 23.2% vs. 17.5% in Q1 2022, in-line guidance range • Increase in gross margin was driven mainly by favorable product mix, targeted 7% 2% cost r
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
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 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 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 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 & Operations
LOCATION MANUFACTURING R&D • CATV Equipment Ningbo, China • Laser & Detector packaging 1,305 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 $ $56.7 $56.7 $52.2 $52.3 $53.0 $44.0* Q1 2022 Q2 2022 Q3 2022 Q4 2022 Q1 2023 Q2 2023 E 22 * Reflects midpoint of Q2 2023 guidance of $40.5 million to $47.5 million provided i
Slide 23: Q1/23 Results
$ Q1/23 IN MILLIONS EXCEPT % TOTAL REVENUE $ 53.0 Q1/23 CATV $ 27.8 DATACENTER $ 20.4 TELECOM $ 3.7 Q1/23 Results GROSS MARGIN 23.2% OPERATING LOSS $ 7.2 NON-GAAP* NET LOSS $ 7.1 CASH** $ 26.9 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 C 3/31/2022 3/31/2021 S 3/31/2023 CASH(1) $49 $40 $27 WORKING CAPITAL(2) $111 $77 $(44) PROPERTY, PLANT & $248 $237 $207 EQUIPMENT, NET TOTAL ASSETS $476 $447 $384 TOTAL DEBT(3) $71 $67 $70 STOCKHOLDERS’ EQUITY $278 $240 $173 (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 David Kuo Dr. Fred Chang SEMICONDUCTOR PRODUCTS GENERAL COUNSEL & CHIEF Joshua Yeh COMPONENT BU HEAD DIVISION HEAD COMPLIANCE OFFICER ASIA GM 2 2 + Y E AR S 2 4 + Y E AR S 1 5 + Y
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 1Q23 GAAP revenue 49,701 54,189 53,267 54,408 211,565 52,242 52,299 56,693 61,584 222,818 53,030 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 1Q21 2Q21 3Q21 4Q21 CY2021 1Q22 2Q22 3Q22 4Q22 CY2022 1Q23 GAAP operating income (loss) (14,038) (13,649) (15,453) (13,626) (56,766) (14,239) (12,899) (13,496