Transcript Document

APPLIED OPTOELECTRONICS, INC.
Nasdaq: AAOI
March 2014
S A F E H A R B O R S TAT E M E N T
This presentation contains forward-looking statements. These forward-looking statements involve risks and uncertainties, as well as
assumptions and current expectations, which could cause the company’s actual results to differ materially from those anticipated in such
forward-looking statements. These risks and uncertainties include but are not limited to: reduction in the size or quantity of customer orders;
change in demand for the company’s products due to industry conditions or other factors; changes in manufacturing operations; volatility in
manufacturing costs; delays in shipments of products; disruptions in the supply chain; change in the rate of design wins or the rate of customer
acceptance of new products; the company’s reliance on a small number of customers for a substantial portion of its revenues; potential pricing
pressure; a decline in demand for our customers products or their rate of deployment of their products; general conditions in the CATV, internet
data center or FTTH markets; changes in the world economy (particularly in the United States, and China); the negative effects of seasonality;
and other risks and uncertainties described more fully in the company’s registration statement and our annual report on Form 10-K as filed with
the Securities and Exchange Commission, as referenced below.
In some cases, you can identify forward-looking statements by terminology such as ‘‘may,’’ ‘‘will,’’ ‘‘should,’’ ‘‘expects,’’ ‘‘plans,’’ ‘‘anticipates,’’
‘‘believes,’’ or ‘‘estimates” or by other similar expressions that convey uncertainty of future events or outcomes. You should not rely on forwardlooking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are
reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by law, we assume no
obligation to update forward-looking statements for any reason after the date of this presentation to conform these statements to actual results
or to changes in the company’s expectations."
In this presentation we include Adjusted EBITDA and certain other non-GAAP measures that we believe are useful to investors in evaluating our
operating performance. Adjusted EBITDA and other non-GAAP measures should not be considered as an alternative to gross profit, income
(loss) from operations, net income (loss) or any other measure of financial performance calculated and presented in accordance with GAAP.
Our Adjusted EBITDA and other non-GAAP measures may not be comparable to similarly titled measures of other organizations because other
organizations may not calculate Adjusted EBITDA or such other non-GAAP measures in the same manner. You are encouraged to evaluate
these adjustments and the reason we consider them appropriate. For a reconciliation of GAAP measures to our non-GAAP measures, please
see the Appendix to this presentation. Please also see our registration statement and our annual report on Form 10-K as filed with the
Securities and Exchange Commission for a description of our calculation of Adjusted EBITDA and certain other non-GAAP measures.
© Applied Optoelectronics, Inc. 2013-14
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OFFERING OVERVIEW
ISSUER
Applied Optoelectronics, Inc.
TICKER / EXCHANGE
AAOI / NASDAQ
OFFERING SIZE
2.7 million (47% primary)
OVER-ALLOTMENT
15% (100% Primary)
EXPECTED PRICING
March 20th, 2014
USE OF PROCEEDS
Working capital and other general corporate purposes
LOCK-UP
90 days for directors, officers and selling stockholders
BOOKRUNNERS
Raymond James, Piper Jaffray
CO-MANAGERS
Cowen and Company, Roth Capital Partners, Craig-Hallum
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DR. THOMPSON LIN
FOUNDER,
PRESIDENT & CEO
B U S I N E S S O V E RV I E W
4
OPTICAL ACCESS PRODUCTS
T H AT E N A B L E
THE GIGABIT AGE
5
BANDWIDTH DEMAND DRIVES GROWTH FOR AOI
+ 33% CAGR
$90.0
DEVICES
($ in millions)
$80.0
$70.0
VIDEO
$60.0
$50.0
$40.0
CLOUD
$30.0
$20.0
$10.0
SOCIAL
2009
2010
2011
2012
2013
ANNUAL REVENUE ($M)
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THE GIGABIT AGE
CABLE TV
BROADBAND
( C AT V )
54% of North American broadband subscribers
receive their internet through traditional CATV network
INTERNET
D ATA
CENTER
Optical ports expected to grow at a 56% CAGR
from 2012 to 2017
FIBER-TOTHE-HOME
(FTTH)
Google deploying 1 Gbps internet service to
Kansas City, Austin, and possibly 34 additional cities
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G E O G R A P H I C A L LY O P T I M I Z E D O P E R AT I O N S
Research & Development
Manufacturing & Operations
 Excellent laser technology
 Excellent manufacturing teams with many years
of experience
 Proprietary Silicon Photonics Technology
 Efficient supply chain
 Strong R&D teams in all 3 sites from lasers,
transceivers to equipment
 Vertical integration from laser chips to
transceivers to equipment with cost advantages
 Customer NRE reimbursements
Headquarters
Other Facilities
Location
Manufacturing
R&D
Ningbo, China
• CATV
Equipment
• Laser
Packaging

644 Employees
Location
Manufacturing
R&D
Location
Manufacturing
R&D
Houston, TX
• Wafer Fab
• Laser chips
• Optical
Components
• FTTH Transceivers

Taipei, Taiwan
• Laser packaging
• Transceivers

229 Employees
273 Employees
8
THREE HIGH-GROWTH MARKETS
CABLE TV
BROADBAND
INTERNET
D ATA C E N T E R
FIBER-TO-THEHOME
Equipment design
outsourcing
International market
expansion
Shift from copper to fiber
Open server architecture
Disruptive deployments
1Gbps to the home
$ 8 5 0 M + TA M
$ 6 0 0 M + TA M
$ 7 0 0 M + TA M
$2.2B OVERALL MARKET OPPORTUNITY
TAM source: Ovum Research Limited, 2013.
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C AT V B R O A D B A N D M A R K E T O P P O R T U N I T Y
GROWTH DRIVERS
International market opportunities
Upgrade cycle – DOCSIS 3.1
Continued outsourcing of design and production
A O I ’ S A D VA N TA G E
Critical laser design and manufacturing
Laser to Equipment
Head-end to Node
KEY CUSTOMERS
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I N T E R N E T D ATA C E N T E R M A R K E T O P P O R T U N I T Y
GROWTH DRIVERS
Paradigm Shift - Fiber replacing copper
(1Gbps to 10Gbps to 40Gbps)
Web 2.0 operators adopting open architecture
A O I ’ S A D VA N TA G E
Direct relationships with Web 2.0 operators
Key integration with white-box server/switch manufacturers
KEY CUSTOMERS
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TRANSCEIVER PORT GROWTH
25,000,000
56% CAGR
20,000,000
15,000,000
40 Gbps QSFP
10 Gbps SFP+
10,000,000
5,000,000
0
2012
2013
2014
2015
2016
2017
Source: Infonetics “10G/40G/100G Optical Transceivers, Biannual Worldwide Market Size and Forecasts, 2 nd edition, October, 2013.
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FIBER TO THE HOME MARKET OPPORTUNITY
GROWTH DRIVERS
Disruptive market entrants
Residential 1 Gbps service
A O I ’ S A D VA N TA G E
Revolutionary WDM-PON transceivers
Transceiver (OLT) for head-end
Transceiver (ONU) tunable laser for home
KEY CUSTOMERS
WDM-PON
G-PON
CONFIDENTIAL
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V E R T I C A L I N T E G R AT I O N D R I V E S D I F F E R E N T I AT I O N
C AT V
D ATA C E N T E R
SUBSYSTEM EQUIPMENT
MODULES TRANSCEIVERS
O P TI CA L PA CK A G E D DE V I CE S
CHIPS
FTTH
PROCESSED WAFER
O P TI CA L S UB A S S E MB LY
S UB S TRATE S
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BROAD PORTFOLIO OF PRODUCTS
C AT V
D ATA C E N T E R
FTTH
Head-Office
TRANSMITTER
Outdoor
NODES
Outdoor
ACCESS
POINTS
COOLED
LASER DIODES
10 GIGABIT
SFP and SFP+
TRANSCEIVERS
ACTIVE OPTICAL
CABLES
40 GIGABIT
QSFP +
TRANSCEIVERS
WDM-PON OLT
TRANSCEIVER
WDM-PON
ONU
TRANSCEIVER
G-PON
TRANSCEIVER
LASER CHIPS
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STRONG TRACK RECORD OF REVENUE GROWTH
ANNUAL REVENUE
$25.0
33%
($ in millions)
$23.7
C A G R (*)
$20.8
$19.6
$20.0
$18.9
$16.4
$15.6
$14.8
$15.0
$11.5
$10.0
$14.3
$12.5
$12.1
$9.5
$5.0
1Q11
YoY Growth
20%
2Q11
(1%)
3Q11
4%
4Q11
56%
1Q12
2Q12
3Q12
4Q12
32%
37%
36%
27%
1Q13
15%
2Q13
3Q13
4Q13
25%
26%
26%
(*) Annual CAGR from 2009 through 2013.
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R E V E N U E S E G M E N TAT I O N
BY MARKET
$25.0
($ in millions)
$20.0
$15.0
$10.0
$5.0
-
1Q11
2Q11
3Q11
4Q11
1Q12
2Q12
CATV & Other
3Q12
4Q12
Data Center
FTTH
1Q13
2Q13
3Q13
4Q13
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R E V E N U E S E G M E N TAT I O N
BY TOP TEN CUSTOMERS
($ in millions)
2012
Customer
Rev
2013
% of Rev
% of 10
Customer
Rev
% of Rev
% of 10
1
CATV
$21.1
33%
43%
1
CATV
$17.2
22%
28%
2
CATV
$7.1
11%
14%
2
Data Center
$14.3
18%
24%
3
CATV
$4.1
6%
8%
3
CATV
$6.9
9%
11%
4
Data Center
$3.7
6%
7%
4
Data Center
$4.8
6%
8%
5
CATV
$3.5
6%
7%
5
CATV
$3.4
4%
6%
6
CATV
$2.7
4%
5%
6
CATV
$3.2
4%
5%
7
FTTH
$2.2
3%
4%
7
CATV
$3.1
4%
5%
8
CATV
$2.1
3%
4%
8
CATV
$2.9
4%
5%
9
Data Center
$1.6
3%
3%
9
CATV
$2.3
3%
4%
$1.3
2%
3%
10 FTTH
$2.2
3%
4%
$49.2
78%
100%
$60.3
77%
100%
10 CATV
Total
Total
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R E V E N U E S E G M E N TAT I O N
BY GEOGRAPHY
(% of Sales)
FY 2012
FY 2013
2%
11%
13%
13%
44%
27%
59%
29%
N. America
Asia Pac
Europe
ROW
N. America
Asia Pac
Europe
ROW
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S I G N I F I C A N T O P E R AT I N G L E V E R A G E
($ in millions)
$25.0
$20.0
$15.0
$10.0
$5.0
1Q11
2Q11
3Q11
4Q11
1Q12
Revenue
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13
Non-GAAP Op Ex
For a reconciliation of GAAP to non-GAAP measures, please see appendix.
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N O N - G A A P F I N A N C I A L R E S U LT S
CY2011
CY2012
CY2013
LONGTERM
TARGET
MODEL
GROSS MARGIN
28.0%
29.9%
29.4%
33-35%
RESEARCH AND
DEVELOPMENT
13.4%
11.8%
10.8%
7-8%
4.9%
4.9%
5.3%
3-4%
GENERAL AND
A DMI NI S TRATI V E
16.0%
12.4%
12.3%
6-8%
O P E RATI NG MA RG I N
(6.3%)
0.7%
1.1%
17-20%
(10.5%)
(0.8%)
0.1%
16-19%
(1.3%)
5.9%
5.7%
19-22%
SALES AND
MARKETING
NET MARGIN
EBITDA MARGIN
For a reconciliation of GAAP to non-GAAP measures, please see appendix.
21
BALANCE SHEET HIGHLIGHTS
($ Millions)
DECEMBER 31,
2012
DECEMBER 31,
2013
PRO FORMA
POST-OFFERING
CASH (1)
$11
$31
$61
W O R K I N G C A P I TA L ( 2 )
$14
$39
$70
TO TA L A S S E T S
$66
$111
$142
TO TA L D E B T ( 3 )
$25
$28
$28
(1)
(2)
(3)
(4)
Cash: Cash, cash equivalents, restricted cash and short term investments.
Working Capital: Total current assets less total current liabilities.
Total Debt: Short-term loans, notes payable and total long-term debt.
On an as adjusted basis to reflect the sale by us of 1,275,235 shares of common stock in this offering, at an assumed public offering price of $26.20 per share, after
deducting underwriting discounts and commissions and estimated offering expenses.
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INVESTMENT HIGHLIGHTS
Focus on three high-growth optical access markets
Leading optical components supplier in CATV market
Tier 1 global customers
Extensive internally developed technology
Vertical integration provides differentiation and sustains margin
Revenue growth and operating leverage opportunity
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THANK YOU