Press Release

First Quarter 2014 Highlights

• Revenue grew 74 percent year-over-year and 5 percent sequentially to reach $24.9 million
• Record data center revenue of $11.6 million grew 220 percent year-over-year and 96 percent sequentially
• Record Fiber-To-The-Home revenue of $2.2 million, up 104 percent year-over-year and up 38 percent sequentially

SUGAR LAND, Texas, May 8, 2014 (GLOBE NEWSWIRE) -- Applied Optoelectronics, Inc. (Nasdaq:AAOI), a leading provider of fiber-optic access network products for the cable broadband, internet data center, and fiber-to-the-home markets, today announced financial results for its first quarter ended March 31, 2014.

"We delivered a very strong first quarter and achieved our fourth consecutive quarter of record revenue, driven by increasing demand for our data center and fiber-to-the-home products," said Dr. Thompson Lin, Applied Optoelectronics, Inc. (AOI) Founder and CEO. "Throughout the quarter, we continued to make steady progress toward executing our growth plan and achieving our operational goals in order to capitalize on our growing market opportunities. We are working to quickly increase our production capacity in order to help keep pace with the robust customer demand for our data center and fiber-to-the-home products."

First Quarter 2014 Financial Summary

• Total revenue grew $10.5 million or 74 percent year-over-year to $24.9 million, compared with $14.3 million in the first quarter of 2013
   
• Gross margin was 34.8 percent, compared with 28.1 percent in the fourth quarter of 2013. Non-GAAP gross margin was 34.9 percent, compared with 28.2 percent in the fourth quarter of 2013 
   
• GAAP net income was $0.1 million, compared with net loss of $0.5 million in the fourth quarter of 2013 and net loss of $1.0 million in the first quarter of 2013
   
• Non-GAAP net income was $0.8 million, compared with non-GAAP net income of $0.3 million in the fourth quarter of 2013 and non-GAAP net loss of $0.7 million in the first quarter of 2013
   
• On March 31, 2014, cash, cash equivalents and short-term investments totaled $61.2 million. In the first quarter, the company received $45.7 million in net proceeds excluding underwriting fees and offering expenses from its follow-on public offering consummated on March 25, 2014

A reconciliation between all GAAP and non-GAAP information referenced above is contained in the tables below. Please also refer to "Non-GAAP Financial Measures" below for a description of these Non-GAAP financial measures.

Second Quarter 2014 Business Outlook ⁽⁺⁾

AOI's outlook for the second quarter of 2014 primarily reflects continued growth in the internet data center market, and increased revenue from the FTTH market and CATV market. The company currently expects:

• Revenue in the range of $28.5 million to $30.0 million  
• On a non-GAAP basis gross margin in the range of 30.5 percent to 31.5 percent  
• On a non-GAAP basis net income in the range of $1.0 million to $2.0 million, and fully diluted earnings per share in the range of $0.06 to $0.13, using approximately 15.8 million shares

⁽⁺⁾ Please refer to the note below on forward-looking statements and the risks involved with such statements as well as the note on Non-GAAP financial measures.  

Conference Call Information

Applied Optoelectronics will host a conference call for analysts and investors to discuss its first quarter 2014 results and outlook for its second quarter of 2014 today, May 8, 2014 at 4:30 p.m. Eastern time / 1:30 p.m. Pacific time. Open to the public, investors may access the call by dialing (480) 629-9760. A live audio webcast of the conference call along with supplemental financial information will also be accessible on the company's website at investors.ao-inc.com. Following the webcast, an archived version will be available on the website for one year. A telephonic replay of the call will be available two hours after the call and will run for five business days and may be accessed by dialing (303) 590-3030 and entering passcode 4676831.

Forward-Looking Information

This press release 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; 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 documents filed with or furnished to the Securities and Exchange Commission. More information about these and other risks that may impact the company's business are set forth in the "Risk Factors" section of the company's Prospectus and quarterly report on file with the Securities and Exchange Commission. 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. All forward-looking statements in this press release are based upon information available to us as of the date hereof, and qualified in their entirety by this cautionary statement. Except as required by law, we assume no obligation to update forward-looking statements for any reason after the date of this press release to conform these statements to actual results or to changes in the company's expectations.

Non-GAAP Financial Measures

We provide Non-GAAP gross margin, Non-GAAP operating income (loss), Non-GAAP net income (loss), Non-GAAP earnings per share, and other non-GAAP measures like Adjusted EBITDA to eliminate the impact of items that we do not consider indicative of our overall operating performance. To arrive at our non-GAAP gross profit, we exclude stock-based compensation expense from our GAAP gross profit. To arrive at our non-GAAP income (loss) from operations, we exclude all amortization of intangible assets, stock-based compensation expense and non-recurring consulting fees, if any, from our GAAP net income (loss) from operations. To arrive at Adjusted EBITDA, we exclude these same items and, additionally, exclude asset impairment charges, loss (gain) from disposal of idle assets, unrealized exchange loss (gain), interest (income) expense, on a net basis, provision for (benefit from) income taxes and depreciation expense, from our GAAP net income (loss). We believe that our non-GAAP measures are useful to investors in evaluating our operating performance for the following reasons:

• We believe that elimination of items such as stock-based compensation expense, amortization and tax is appropriate because treatment of these items may vary for reasons unrelated to our overall operating performance;  
• We believe that non-GAAP measures provide better comparability with our past financial performance, period-to-period results and with our peer companies, many of which also use similar non-GAAP financial measures; and  
• We anticipate that investors and securities analysts will utilize non-GAAP measures to evaluate our overall 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.

About Applied Optoelectronics

Applied Optoelectronics Inc. (AOI) is a leading developer and manufacturer of advanced optical products, including components, modules, and equipment. AOI's products are the building blocks for broadband fiber access networks around the world, where they are used in the CATV broadband, internet datacenter, and fiber-to-the-home markets. AOI supplies optical networking lasers, components and equipment to tier-1 customers in all three of these markets. In addition to its corporate headquarters, wafer fab and advanced engineering and production facilities in Sugar Land, TX, AOI has engineering and manufacturing facilities in Taipei, Taiwan and Ningbo, China. For additional information, visit www.ao-inc.com .

Applied Optoelectronics Inc. and the related AOI logo are trademarks of Applied Optoelectronics Inc.

CONTACT: Investor Relations Contacts:

         

         Applied Optoelectronics, Inc.

         James L. Dunn, Jr.

         Chief Financial Officer

         ir@ao-inc.com

         

         The Blueshirt Group, Investor Relations

         Maria Riley

         +1-415-217-7722

         ir@ao-inc.com