Alliance Fiber Optic Products, Inc.
Ticker: AFOP
Safe Harbor Under the Private Securities Litigation Act of 1995
Except for historical information, the matters discussed in this presentation contain forward-looking statements regarding future trends or events, including, but not limited to, the development of our technology, the efficiency of our manufacturing capabilities, the development of our manufacturing capabilities, the development of our facilities in the Far East, estimates of our revenues, the development of new products, and our anticipated financial results, that involve risks and uncertainties. Please be aware that these statements are only predictions and that actual events or results may differ materially. The Company is required to file documents from time to time with the Securities and Exchange Commission. These documents identify important factors that could cause actual results to differ materially from those contained in our projections or forward-looking statements. Please refer to the Company s prospectus and other interim reports as filed with the Companys Securities and Exchange Commission for a discussion of those risk factors. The Company assumes no obligation to update the information in this presentation.
2011 AFOP. All rights reserved.
Unique Investment Story
1 2 3
Profitable and expanding business Strong financial position Multiple served markets; diversified customer base Broad product line manufacturer Innovative technology; extensive patent portfolio Cost effective Asian operations from inception
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2011 AFOP. All rights reserved.
Company Background
Stock Exchange Corporate Location Asia Operations
History y
Founded In 1995
Acquired F.O. Division of Hong Hai/ Foxconn
NASDAQ
Sunnyvale, California
275 Gibraltar Dr.
Tu-Cheng Taiwan ShenZhen, ShenZhen China
AFOP
Industry Expertise
Financial Strength
Management Bandwidth
World Class Factories
2011 AFOP. All rights reserved.
Optics Revolution
Fiber to Home / Consumer Fiber
Mark Mark kets kets
Metro Access
Long Haul Core
Broadband Access
Metro Core
Time
2011 AFOP. All rights reserved. 5
Multiple Bandwidth Drivers
Cloud Computing p g
AFOP CCWDM AFOP FAU, Micro- optics & Connectivity
ROADM
ROADM
AFOP Connectivity
Metro Core and Long Haul ROADM Upgrades 40G to 100G
3G/4G Cellular Backhaul and CATV
Office Parks Small Businesses
ONT ONT
Residential
ONT ONT
FTTP Overlay
Small Businesses
AFOP Connectivity
FTTP Full Build
AFOP Passives
Copper Feeder
Split ter Hub
AFOP Splitters Split
ter
Splitter
ONT
ONT
AFOP Connectivity
ONT ONT
Circuit Switch VW DM
ONT
AFOP Connectivity
AFOP Connectivity
AFOP Passives
ONT
ONT
Splitter
O L T
Video
AFOP Connectivity
* Courtesy of Verizon
Enterprise 10G to 40/100G Ethernet
2011 AFOP. All rights reserved. 6
FTTH NGPON
AFOPs Mission
AFOP designs and manufactures components, modules and subsystems that empower dynamic optic networks and facilitate the migration of fiber optics g p from the long haul through to the last mile
2011 AFOP. All rights reserved.
AFOPs Strategy
I. Strong Multi-Platform Product Portfolio Multi Platform
Increasing Spend Capture
II. Innovative Constructive Technologies g
Market Control
III. Integration for Revenue; Devices for Profits
Vertical Leverage for Increasing Returns
IV. IV Highest Q/C Manufacturing Globally
Long Term Competitiveness
2011 AFOP. All rights reserved.
Connectivity Product Lines
Basic Building Blocks
Economic Solutions for Access Market
2011 AFOP. All rights reserved.
Optical Passives Product Lines
Broad and Advanced Product Offering
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Integrated Photonic Solutions
ODM solutions with integrated multifunctionality Embedded AFOP devices: Passives & Connectivity Custom packaging y flexibility
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Innovative Technology
Innovative and patented solutions for 40/100G Ethernet FOC approved FTTX connectivity products
Submicron precision FAU for ROADMs Advanced packaging technology for dynamic Cloud Network components
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Manufacturing Excellence
Modular Operations Allow Flexibility
DFM for All Products
Highest Q/C Ratio
Global Logistics Asia Operations From Inception
Vertical Integration Drives Competitive Cost @ Volume
Key Performance Drivers
2011 AFOP. All rights reserved. 13
Multiple Markets Served
Metro Access Broadband
FTTX
FTTH
FTTN
FTTC
Long Haul
Premise Wiring Enterprise Storage
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Expanding Customer Base
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Financial Overview
2011 AFOP. All rights reserved.
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Financial Highlights Stable revenues stream from business Continuous profitability for years Leading operating performance Strong balance sheet
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Quarterly Revenues
$14.0 $12.0 $10.0
$9.2 $9.2 $9.4 $ $8.2 $8.4 $7.6 $7.7 $7.0 $7.5 $13.3 $12.1 $10.8 $10.3 $9.4 $8.7 $6.7 $11.6 $11 6
( (in millions s)
$8.0 $6.0 $4.0 $2.0 $-
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
2007
2008
2009
2010
2011
* Please refer to SEC filing for the exact numbers. 2011 AFOP. All rights reserved. 18
Quarterly Operating Performance
03/31/10 Revenues Gross Margin R&D Sales, G & A Operating Profits Operating Margin EBITDA EPS $8.406 32.1% $0.709 $1.494 $0.492 $0 492 5.9% $0.770 $0.08 06/30/10 $12.086 33.5% $0.870 $1.607 $1.575 $1 575 13% $1.889 $0.19 09/30/10 $13.276 35.5% $0.882 $1.621 $2.210 $2 210 16.6% $2.596 $0.24 12/31/10 $11.638 35.0% $0.757 $1.495 $1.823 $1 823 15.7% $2.237 $0.20 03/31/11 $9.450 32.1% $ $0.718 $1.578 $738 7.8% $1.184 $0.12
* Pro Forma Results: $ in millions * Please refer to SEC filing for the exact numbers
2011 AFOP. All rights reserved. 19
Annual Revenues
$50 $50 $40 $27
(in millions)
$45 $39 $34 $21 $15 $30
$30 $20 $10 $
YR2004 YR2005 YR2006 YR2007 YR2008 YR2009 YR2010
* Please refer SEC filing for the exact numbers. * Please refer toto SEC filing for the exact numbers.
2011 AFOP. All rights reserved. 20
Annual Operating Performance
2006 Revenues Gross Margin R&D Sales, G & A Operating P&L Operating Margin EBITDA EPS * $26.8 27.7% $3.0 $5.2 ($1.001) (3.7%) $0.873 $0.08
Pro Forma Results: $ in millions
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2007 $33.8 31.5% $3.2 $5.6 $1.606 4.8% $3.288 $0.41
2008 $38.8 31.4% $3.2 $5.8 $2.950 7.6% $4.366 $0.49
2009 $29.8 31.3% $3.0 $5.6 $ $0.751 2.5% $1.903 $0.17
2010 $45.4 34.2% $3.2 $6.2 $6.099 13.4% $7.492 $0.70
* Please refer to SEC filing for the exact numbers
Balance Sheet Summary
12/31/07 Cash & Investments Long-Term Liability Stockholders Equity
(Trailing Quarter) DSO (T ili Q t )
12/31/08
12/31/09
12/31/10
03/31/11
$36.5
$1.0 $42.9 53 days 5.0x
$40.3
$0.9 $48.0 58 d days 4.0x
$42.3
$0.8 $48.9 57 d days 4.1x
$45.4
$0.8 $58.0 60 days 4.1x
$45.1
$0.8 $59.4 65 d days 3.2x
Inventory Turnover
* Pro Forma Results: $ in millions * Please refer to SEC filing for the exact numbers
2011 AFOP. All rights reserved. 22
Most Trustworthy Companies Award
by F b b Forbes
3yr AGR Score
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Investment Highlights
1 2 3
Profitable and expanding business Strong financial position Multiple served markets; diversified customer base Broad product line manufacturer Innovative technology; extensive patent portfolio Cost effective Asian operations from inception
4 5 6
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2011 AFOP. All rights reserved.
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