AFOP REPORTS THIRD QUARTER, 2015 FINANCIAL RESULTS

Sunnyvale, CA – October 28, 2015 - 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, 2015.

Revenues for the third quarter of 2015 were $18,060,000, similar to revenues of $18,096,000 reported in the third quarter of 2014, and a 28% decrease from revenues of $25,045,000 reported in the second quarter of 2015.

Net income for the quarter ended September 30, 2015, was $3,653,000, or $0.20 per share, compared to net income of $4,303,000, or $0.23 per share, for the third quarter of 2014, and net income of $5,040,000, or $0.28 per share, for the second quarter of 2015.

Gross margin for the quarter ended September 30, 2015 was 39.3%, compared to 39.5% in the year ago quarter and 41.9% in the second quarter of 2015. Operating margin for the quarter ended September 30, 2015 was 20.6%, compared to 22.9% in the year ago quarter and 27.0% in the second quarter of 2015.

Non-GAAP net income for the quarter ended September 30, 2015 was $4,197,000, or $0.24 per share, compared to non-GAAP net income of $4,571,000, or $0.25 per share, for the third quarter of 2014, and non-GAAP net income of $6,705,000, or $0.38 per share, for the second quarter of 2015.

Non-GAAP gross margin for the quarter ended September 30, 2015 was 40.1%, compared to 39.9% in the year ago quarter and 42.5% in the second quarter of 2015. Non-GAAP operating margin for the quarter ended September 30, 2015 was 25.3%, compared to 25.3% in the year ago quarter and 30.1% in the second quarter of 2015.

Peter Chang, President and Chief Executive Officer, commented, “During the third quarter, we experienced the effect of inventory control by our largest Web 2.0 customer, which resulted in a sequential decrease in our third quarter revenue. Despite that, our revenue from other customers grew on a year over year basis to help us achieve a similar level of revenues compared with the year ago quarter. We believe we adjusted to this temporary shortfall well and continued to deliver strong financial performance within our industry peer group. Most importantly, we made good progress meeting our customers’ needs, extending our product technology and improving our operations during the quarter.”

“Regarding forward guidance, we expect revenues in the remaining quarter of 2015 to be higher sequentially. Data bandwidth demands continue to increase and the conversion from copper technology to fiber technology in data center applications continues accelerating. We are encouraged by growing demands for our products and the prospect of delivering record sales and profits in the coming years.” concluded Mr. Chang. 

Conference Call
A more detailed review of third quarter financial results as well as the outlook for the fourth quarter of 2015 will be provided when the complete third quarter results are discussed on a conference call at 1:30 p.m. (Pacific) on October 28, 2015. To participate in AFOP’s conference call, 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 56988049. AFOP will also provide a live webcast of its third quarter 2015 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 and profit levels and the time periods thereof, our business prospects, demand for our products and sources of demand, our expectations regarding future orders by customers, 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, the success of cost control efforts, 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 Quarterly Report on Form 10-Q for the quarter ended June 30, 2015. 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.

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Use of Non-GAAP Financial Information

The company provides Non-GAAP gross margin, Non-GAAP operating 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, income tax expense and depreciation expense.

Management uses these Non-GAAP financial measures to evaluate the operating performance of the business and aid in 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 our 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.