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AFOP Reports Record Quarterly Sales And Profits In Q1 2014. Guidance For Year-Over-Year Increases Of 31% In Q2 2014

Peter Chang, President and Chief Executive Officer, commented, "Thanks to the support of our customers and the effort by our Asia operations, we were able to deliver record quarterly revenue, which exceeded our previous guidance, during a normally slower season which includes the Chinese New Year holiday. In addition to the record quarterly revenue, we continued to improve our quarterly financial performance with record gross margin, operating margin and profits."

"While data bandwidth demands continue to increase and the next growth cycle in the fiber optics industry is emerging, we are encouraged by the prospect of business growth in the coming years, and with the progress we made serving our customers and extending our product technology in recent quarters. Based on input from our customers and current orders, we expect revenues in the coming quarter to be above $25 million, which will be a new record for quarterly sales and will represent a 31% increase from the year ago quarter." concluded Mr. Chang.

Conference Call

Management will host a conference call at 1:30 p.m. PT on April 24, 2014 to discuss AFOP's first quarter 2014 financial results as well as the outlook for the second quarter of 2014. Please call 877-675-3572 at least ten minutes prior to the call in order for the operator to connect you. The confirmation number for the call is 19751761. AFOP will also provide a live webcast of its first quarter 2014 conference call at AFOP's website: www.afop.com. The webcast replay will be available on AFOP's website 90 minutes after the live conference call.

About AFOP

Founded in 1995, Alliance Fiber Optic Products, Inc. designs, manufactures and markets a broad range of high performance fiber optic components and integrated modules. AFOP's products are used by leading and emerging communications equipment manufacturers to deliver optical networking systems to the long-haul, enterprise, data center, metropolitan and last mile access segments of the communications network. AFOP offers a broad product line of passive optical components including interconnect systems, splitters, thin film CWDM and DWDM components and modules, and optical attenuators. AFOP is headquartered in Sunnyvale, California, with manufacturing and product development capabilities in the United States, Taiwan and China. AFOP's website is located at http://www.afop.com.

Except for the historical information contained herein, the matters set forth in this press release, including statements as to our expectations regarding future revenue levels and the time periods thereof, our business prospects, demand for our products and sources of demand, and our expectations for growth in the fiber optic industry, are forward looking statements within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially, including, but not limited to general economic conditions and trends, trends in demand for bandwidth, the impact of competitive products and pricing, timely introduction of new technologies, timely design acceptance by our customers, the acceptance of new products and technologies by our customers, customer demand for our products, the timing of customer orders, loss of key customers or customer orders, our ability to ramp new products into volume production, the mix of products sold and product pricing, the costs associated with running our operations, industry-wide shifts in supply and demand for optical components and modules, industry overcapacity and demand for bandwidth, the success of cost control initiatives, our ability to obtain and maintain operational efficiencies, financial stability in foreign markets, and other risks detailed from time to time in our SEC reports, including AFOP's Annual Report on Form 10-K for the year ended December 31, 2013. These forward-looking statements speak only as of the date hereof. AFOP disclaims any intention or obligation to update or revise any forward-looking statements.

ALLIANCE FIBER OPTIC PRODUCTS, INC.
Condensed Consolidated Statements of Operations
(In thousands, except per share amounts)
(Unaudited)
 
  Three Months Ended
  Mar. 31, Dec. 31, Mar. 31,
  2014 2013 2013
       
Revenues  $ 24,882  $ 21,804  $ 12,153
       
Cost of revenues  14,968  13,230  7,745
Gross profit  9,914  8,574  4,408
       
Operating expenses:      
Research and development  1,108  1,006  813
Selling, marketing and administrative  2,336  2,337  1,828
Total operating expenses  3,444  3,343  2,641
       
Income from operations  6,470  5,231  1,767
Interest and other income, net  147  239  133
Income before benefit (provision) for income taxes  $ 6,617  $ 5,470  $ 1,900
Benefit (provision) for income taxes  (1,602)  1,585  (50)
Net income  $ 5,015  $ 7,055  $ 1,850
       
Net income per share      
 Basic   $ 0.27  $ 0.38  $ 0.11
 Diluted   $ 0.26  $ 0.37  $ 0.10
       
Weighted average shares outstanding      
 Basic   18,422  18,382  17,190
 Diluted   19,070  19,198  17,812
       
Included in costs and expenses above:      
Stock-based compensation expense      
Cost of revenue  $ 176  $ 158  $ 35
Research and development  83  83  33
Selling, marketing and administrative  458  422  212
Total  $ 717  $ 663  $ 280
 
ALLIANCE FIBER OPTIC PRODUCTS, INC.
Condensed Consolidated Balance Sheets
(in thousands)
(Unaudited)
 
  Mar. 31, Dec. 31,
  2014 2013
ASSETS    
Current assets:    
Cash and short-term investments  $ 51,350  $ 46,679
Accounts receivable, net  13,961  11,566
Inventories  10,330  10,630
Deferred tax asset  5,378  6,036
Other current assets  1,815  1,745
Total current assets  82,834  76,656
     
Long-term investments  10,498  10,453
Property and equipment, net  13,069  13,258
Other assets  178  198
Total assets  $ 106,579  $ 100,565
     
     
LIABILITIES AND STOCKHOLDERS' EQUITY    
Current liabilities:    
Accounts payable  $ 11,761  $ 11,657
Accrued expenses and other current liabilities  7,649  7,134
Total current liabilities  19,410  18,791
     
Long-term liabilities  601  600
Total liabilities  20,011  19,391
     
Stockholders' equity  86,568  81,174
Total liabilities and stockholders' equity  $ 106,579  $ 100,565
 
ALLIANCE FIBER OPTIC PRODUCTS, INC.
Reconciliations from GAAP to Non-GAAP
(In thousands, except per share amounts)
(Unaudited)
 
  Three Months Ended
  Mar. 31, Dec. 31, Mar. 31,
  2014 2013 2013
Gross Profit Reconciliation      
GAAP gross profit $ 9,914 $ 8,574 $4,408
Stock-based compensation expense 176 158 35
Adjusted (non-GAAP) gross profit $ 10,090 $ 8,732 $ 4,443
Adjusted (non-GAAP) gross margin 40.6% 40.0% 36.6%
       
Operating Expense Reconciliation      
GAAP operating expenses $ 3,444 $ 3,343 $ 2,641
Stock-based compensation expense 541 505 245
Adjusted (non-GAAP) operating expenses $ 2,903 $ 2,838 $ 2,396
       
Income from Operations Reconciliation      
GAAP income from operations $ 6,470  $ 5,231  $ 1,767
Adjustments related to gross profit 176 158 35
Adjustments related to operating expense 541 505 245
Adjusted (non-GAAP) income from operations $ 7,187 $ 5,894 $ 2,047
Adjusted (non-GAAP) operating margin  28.9%  27.0%  16.8%
       
Net Income Reconciliation      
GAAP net income  $ 5,015  $ 7,055  $ 1,850
Adjustments related to gross profit 176 158 35
Adjustments related to operating expense 541 505 245
Income tax provision adjustments  659  (2,335)  -- 
Adjusted (non-GAAP) net income  $ 6,391  $ 5,383  $ 2,130
       
Weighted average shares outstanding      
Basic 18,422 18,382 17,190
Diluted 19,070 19,198 17,812
       
Net Income per Common Share - Basic:      
 GAAP as reported  $ 0.27  $ 0.38  $ 0.11
 Non-GAAP as adjusted   $ 0.35  $ 0.29  $ 0.12
       
Net Income per Common Share - Diluted:      
 GAAP as reported   $ 0.26  $ 0.37  $ 0.10
 Non-GAAP as adjusted   $ 0.34  $ 0.28  $ 0.12
       
Non-GAAP EBITDA      
Non-GAAP net income $ 6,391 $ 5,383 $ 2,130
Depreciation expense 684 662 452
Interest income (178) (178) (159)
Income tax expense 944 750 50
Non-GAAP EBITDA $ 7,841 $ 6,617 $ 2,473

Use of Non-GAAP Financial Information

The company provides Non-GAAP gross margin, Non-GAAP net income, Non-GAAP basic and diluted net income per share and EBITDA, as supplemental information. In computing these non-GAAP financial measures, the company excludes certain items included under GAAP, including stock-based compensation expense and income tax provision adjustments. In computing EBITDA, the company also excludes interest income, provision for (benefit from) income taxes and depreciation expense.

Management uses these Non-GAAP financial measures to evaluate the operating performance of the business and aid in the period-to-period comparability. Management also uses the Non-GAAP financial measures for planning and forecasting and measuring results against its forecast. Using several measures to evaluate the business allows the company and investors to assess the company's relative performance. The Non-GAAP financial measures provided herein may not provide information that is directly comparable to that provided by other companies in the company's industry, as other companies may calculate such financial results differently. The company's Non-GAAP financial measures are not measurements of financial performance under GAAP, and should not be considered as alternatives to the financial measures derived in accordance with GAAP. The company does not consider these Non-GAAP financial measures to be a substitute for, or superior to, the information provided by GAAP financial results. A reconciliation of the Non-GAAP financial measures to the most directly comparable GAAP financial measures is provided in the financial schedules portion of this press release.

CONTACT: Keting Lin, IR Associate
         Alliance Fiber Optic Products, Inc.
         408-736-6900 x188
         Email: klin@afop.com

Alliance Fiber Optic Products, Inc. Logo

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