applied optoelectronics, inc. nasdaq: aaoi march 2014
TRANSCRIPT
APPLIED OPTOELECTRONICS, INC. Nasdaq: AAOI
M a r c h 2 0 1 4
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 forward-looking 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.
2© Applied Optoelectronics, Inc. 2013-14
O F F E R I N G O V E R V I E W
I S S U E R Applied Optoelectronics, Inc.
T I C K E R / E X C H A N G E AAOI / NASDAQ
O F F E R I N G S I Z E 2.7 million (47% primary)
O V E R - A L L O T M E N T 15% (100% Primary)
E X P E C T E D P R I C I N G March 20th, 2014
U S E O F P R O C E E D S Working capital and other general corporate purposes
L O C K - U P 90 days for directors, officers and selling stockholders
B O O K R U N N E R S Raymond James, Piper Jaffray
C O - M A N A G E R S Cowen and Company, Roth Capital Partners, Craig-Hallum
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BUSINESS OVERVIEW
D R . T H O M P S O N L I N
F O U N D E R , P R E S I D E N T & C E O
4
O P T I C A L A C C E S S P R O D U C T S
T H AT E N A B L E
T H E G I G A B I T A G E
5
B A N D W I D T H D E M A N D D R I V E S G R O W T H F O R A O I
DEVICES
VIDEO
CLOUD
SOCIAL
A N N U A L R E V E N U E ( $ M )
+ 33% CAGR
6
2009 2010 2011 2012 2013-
$10.0
$20.0
$30.0
$40.0
$50.0
$60.0
$70.0
$80.0
$90.0 ($ in millions)
T H E G I G A B I T A G E
54% of North American broadband subscribersreceive their internet through traditional CATV network
7
Optical ports expected to grow at a 56% CAGR from 2012 to 2017
Google deploying 1 Gbps internet service toKansas City, Austin, and possibly 34 additional cities
C A B L E T V B R O A D B A N D ( C A T V )
I N T E R N E T D A T A C E N T E R
F I B E R - T O -T H E - H O M E ( F T T H )
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
Location Manufacturing R&D
Houston, TX
229 Employees
• Wafer Fab• Laser chips• Optical
Components• FTTH Transceivers
ü
Headquarters
Other Facilities
Excellent manufacturing teams with many years of experience
Efficient supply chain
Vertical integration from laser chips to transceivers to equipment with cost advantages
Manufacturing & Operations
Excellent laser technology
Proprietary Silicon Photonics Technology
Strong R&D teams in all 3 sites from lasers, transceivers to equipment
Customer NRE reimbursements
Research & Development
Location Manufacturing R&D
Ningbo, China
644 Employees
• CATV Equipment
• Laser Packaging
ü
Location Manufacturing R&D
Taipei, Taiwan
273 Employees
• Laser packaging• Transceivers ü
8
T H R E E H I G H - G R O W T H M A R K E T S
TAM source: Ovum Research Limited, 2013.
$ 2 . 2 B O V E R A L L M A R K E T O P P O R T U N I T Y
$ 7 0 0 M + T A M$ 8 5 0 M + T A M
C A B L E T V B R O A D B A N D
I N T E R N E T D A T A C E N T E R
F I B E R - T O - T H E -H O M E
Equipment design outsourcing
International market expansion
$ 6 0 0 M + T A M
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Shift from copper to fiber
Open server architecture
Disruptive deployments
1Gbps to the home
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
G R O W T H D R I V E R S
International market opportunities
Upgrade cycle – DOCSIS 3.1
Continued outsourcing of design and production
A O I ’ S A D V A N T A G E
Critical laser design and manufacturing
Laser to Equipment
Head-end to Node
K E Y C U S T O M E R S
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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
K E Y C U S T O M E R S
G R O W T H D R I V E R S
Paradigm Shift - Fiber replacing copper (1Gbps to 10Gbps to 40Gbps)
Web 2.0 operators adopting open architecture
A O I ’ S A D V A N T A G E
Direct relationships with Web 2.0 operators
Key integration with white-box server/switch manufacturers
11
12Source: Infonetics “10G/40G/100G Optical Transceivers, Biannual Worldwide Market Size and Forecasts, 2 nd edition, October, 2013.
2012 2013 2014 2015 2016 20170
5,000,000
10,000,000
15,000,000
20,000,000
25,000,000
40 Gbps QSFP10 Gbps SFP+
56% CAGR
T R A N S C E I V E R P O R T G R O W T H
G R O W T H D R I V E R S
Disruptive market entrants
Residential 1 Gbps service
A O I ’ S A D V A N T A G E
Revolutionary WDM-PON transceivers
Transceiver (OLT) for head-end
Transceiver (ONU) tunable laser for home
F I B E R T O T H E H O M E M A R K E T O P P O R T U N I T Y
K E Y C U S T O M E R S
W D M - P O N G - P O N
CON F I D EN T I A L
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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
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C AT V D ATA C E N T E R F T T H
S U B S T R A T E SP R O C E S S E D W A F E RC H I P S
O P T I C A L S U B A S S E M B L YO P T I C A L P A C K A G E D D E V I C E S
M O D U L E S T R A N S C E I V E R SS U B S Y S T E M E Q U I P M E N T
B R O A D P O R T F O L I O O F P R O D U C T S
F T T HC AT V D ATA C E N T E R
COOLED LASER DIODES
LASER CHIPS
Head-Office TRANSMITTER
OutdoorNODES
Outdoor ACCESS POINTS
ACTIVE OPTICAL CABLES
10 GIGABITSFP and SFP+ TRANSCEIVERS
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40 GIGABITQSFP + TRANSCEIVERS
G-PON TRANSCEIVER
WDM-PON OLT TRANSCEIVER
WDM-PON ONU TRANSCEIVER
S T R O N G T R A C K R E C O R D O F R E V E N U E G R O W T H
20% (1%) 4% 56% 32% 37% 36% 27% 15% 25% 26% 26%
YoY Growth
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A N N U A L R E V E N U E
(*) Annual CAGR from 2009 through 2013.
1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13
-
$5.0
$10.0
$15.0
$20.0
$25.0
$9.5
$11.5$12.1
$14.8
$12.5
$15.6$16.4
$18.9
$14.3
$19.6
$20.8
$23.733% C A G R ( * )($ in millions)
R E V E N U E S E G M E N TAT I O N B Y M A R K E T
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1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13-
$5.0
$10.0
$15.0
$20.0
$25.0
CATV & Other Data Center FTTH
($ in millions)
R E V E N U E S E G M E N TAT I O N B Y T O P T E N C U S T O M E R S
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($ in millions)
2012 2013
Customer Rev % 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%
10 CATV $1.3 2% 3% 10 FTTH $2.2 3% 4%
Total $49.2 78% 100% Total $60.3 77% 100%
44%
29%
13%
13%
N. America Asia Pac Europe ROW
R E V E N U E S E G M E N TAT I O N B Y G E O G R A P H Y
(% of Sales)
19
59%
27%
11%
2%
N. America Asia PacEurope ROW
FY 2013FY 2012
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
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For a reconciliation of GAAP to non-GAAP measures, please see appendix.
1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13-
$5.0
$10.0
$15.0
$20.0
$25.0
Revenue Non-GAAP Op Ex
($ in millions)
N O N - G A A P F I N A N C I A L R E S U LT S
C Y 2 0 1 1 C Y 2 0 1 2 C Y 2 0 1 3
L O N G -T E R M
TA R G E T M O D E L
G R O S S M A R G I N 28.0% 29.9% 29.4% 33-35%
R E S E A R C H A N D D E V E L O P M E N T 13.4% 11.8% 10.8% 7-8%
S A L E S A N D M A R K E T I N G 4.9% 4.9% 5.3% 3-4%
G E N E R A L A N D A D M I N I S T R A T I V E 16.0% 12.4% 12.3% 6-8%
O P E R A T I N G M A R G I N (6.3%) 0.7% 1.1% 17-20%
N E T M A R G I N (10.5%) (0.8%) 0.1% 16-19%
E B I T D A M A R G I N (1.3%) 5.9% 5.7% 19-22%
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For a reconciliation of GAAP to non-GAAP measures, please see appendix.
B A L A N C E S H E E T H I G H L I G H T S
($ Millions)
D E C E M B E R 3 1 , 2 0 1 2
D E C E M B E R 3 1 ,2 0 1 3
P R O F O R M A P O S T-
O F F E R I N G
C A S H ( 1 ) $11 $31 $61
W O R K I N G C A P I T A L ( 2 ) $14 $39 $70
T O T A L A S S E T S $66 $111 $142
T O T A L D E B T ( 3 ) $25 $28 $28
(1) Cash: Cash, cash equivalents, restricted cash and short term investments. (2) Working Capital: Total current assets less total current liabilities.(3) Total Debt: Short-term loans, notes payable and total long-term debt.(4) 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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Vertical integration provides differentiation and sustains margin
I N V E S T M E N T H I G H L I G H T S
Focus on three high-growth optical access markets
Leading optical components supplier in CATV market
Extensive internally developed technology
Revenue growth and operating leverage opportunity
Tier 1 global customers
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THANK YOU