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

October 29, 2014


AFOP REPORTS THIRD QUARTER, 2014 FINANCIAL RESULTS


WITH SEQUENTIAL GROWTH GUIDANCE

Sunnyvale, CA – October 29, 2014 - Alliance Fiber Optic Products, Inc. (Nasdaq GM: AFOP), an innovative supplier of fiber optic components, subsystems and integrated modules for the optical network equipment market, today reported its financial results for the third quarter ended September 30, 2014.

Revenues for the third quarter of 2014 were $18,096,000, a 22% decrease from revenues of $23,074,000 reported in the third quarter of 2013, and a 25% decrease from revenues of $24,199,000 reported in the second quarter of 2014.

Net income for the quarter ended September 30, 2014, was $4,303,000, or $0.23 per share, compared to net income of $5,621,000, or $0.31 per share, for the third quarter of 2013, and net income of $3,782,000, or $0.20 per share, for the second quarter of 2014. Included in net income for the third and second quarter of 2014 are income tax benefit and provision adjustments of $168,000 and $2,134,000 respectively, as a result of deferred income tax benefit and expenses based on utilization of net operating loss. Excluding these tax benefit and provision adjustments, net income in the third quarter of 2014 of $4,135,000, or $0.22 per share, compared to net income in the second quarter of 2014 of $5,916,000, or $0.32 per share.

Gross margin for the quarter ended September 30, 2014 was 39.5%, compared to 38.4% in the year ago quarter and 40.1% in the second quarter of 2014. Operating margin for the quarter ended September 30, 2014 was 22.9%, compared to 24.5% in the year ago quarter and 27.1% in the second quarter of 2014.

Non-GAAP net income for the quarter ended September 30, 2014 decreased to $4,571,000, or $0.25 per share, compared to non-GAAP net income of $6,184,000, or $0.34 per share, for the third quarter of 2013, and non-GAAP net income of $6,446,000, or $0.35 per share, for the second quarter of 2014.

Non-GAAP gross margin for the quarter ended September 30, 2014 was 39.9%, compared to 38.9% in the year ago quarter and 40.5% in the second quarter of 2014. Non-GAAP operating margin for the quarter ended September 30, 2014 was 25.3%, compared to 27.0% in the year ago quarter and 29.3% in the second quarter of 2014.

Peter Chang, President and Chief Executive Officer, commented, “During the third quarter, we experienced weakness in normal sales levels across several leading customers without any noted market share loss. Our understanding is that this reflects a weakening in general market conditions, as some companies in the optical network market segment have also reported recently. We adjusted to this shortfall well and continued to deliver strong financial performance within our industry peer group, with stable gross margins, well controlled inventory levels, and an improved balance sheet. Most importantly, we made good progress meeting our customers’ needs, extending our product technology and improving our operations.”


The following information was filed by Alliance Fiber Optic Products Inc (AFOP) on Wednesday, October 29, 2014 as an 8K 2.02 statement, which is an earnings press release pertaining to results of operations and financial condition. It may be helpful to assess the quality of management by comparing the information in the press release to the information in the accompanying 10-Q Quarterly Report statement of earnings and operation as management may choose to highlight particular information in the press release.

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