corporate update november 2012 -...

Corporate Update November 2012

NYSE AMEX: APINYSE AMEX: API

Forward Looking Statementg

This presentation contains forward-looking statements.p gAll forward-looking statements involve risks anduncertainties, including, without limitation, the risksdetailed in the Company’s filings and reports with thedetailed in the Company s filings and reports with theSecurities and Exchange Commission. Such statementsare only predictions, and actual events or results may

ff fdiffer materially from those projected.

2

What is Optoelectronics?pThe manufacturing and application of electronic devices that create detect and control visible and invisible lightthat create, detect and control visible and invisible light

L M ki S t

LED Lights

Laser Marking Systems

Barcode Scanners

Digital CamerasSolar Panels Telecommunications

3

API Leading Edge Technologiesg g g

• API excels in making:Hi h d d t t hi h t h t i t– High-speed detectors which turn a photon into an electron

– Industrial and commercial optical sensorsp– Optical instrumentation used to determine physical

properties• When deployed as components, sub-systems

and systems, these technologies solve problems f t h A il t Al t l L tfor customers such as Agilent, Alcatel-Lucent, Raytheon, 3M, Honeywell and many others

4

Comparative Stock Chartp

400%

500%

300%

400%

APIPeer Group

100%

200% API

OCLR

JDSU

ALU

NPTN

-100%

0% FNSR

-200%

5

Optoelectronic SemiconductorspThree Product Platforms Five Markets

Picometrix High Speed Optical Receiver Products

Telecom

MedicalAPI Optoelectronic Solutions

components

Military

Medicalp

subsystems

Industrial/NDTT-Gauge® Terahertz Products

HomelandSecurity

systems

6

Market Revenue FY2012

Homeland Security 5%

Telecommunications 40%Military/Aerospace

15%

Medical 4%

5%

Industrial Sensing/NDT 36%

7

36%

Major Growth Potential(Pl tf )(Platform)• Telecom (components) – Entering Growth Phase

[30%+ CAGR]– Enabling the 4G and LTE growth

• 2013 and beyond– Test & Measurement growth for next generation systems in 2013

• Industrial/Non-Destructive Testing (systems)[Emerging Market, >30%+ CAGR]– Process & Quality Control

– Real time measurements and control capability – Aerospace Quality Control (F-35 program)

• Homeland Security (systems)[M k t U d D l t][Market Under Development]– Passenger screening

8

Picometrix HSOR (C t )(Components)

• Telecom CustomersMajor OEMS buy from us because:– Major OEMS buy from us because:

• Need solutions• Do not have our capability 100G Line-sidep y

CoreStream Agility

9

API Optoelectronic Solutions (Subsystems)(Subsystems)

• Military/Space Market – High reliability applications

• Medical Market – Imaging CT

• Industrial Market– Process controlg y pp

– Smart munitions – Diagnostics– Safety

10

Military Applications (Subsystems)(Subsystems)

Satellite Positioning

Laser range finders

Optical proximity fuseMissile guidance

Heads-up displays

11

Industrial Applications (S b t )(Subsystems)

Laser leveling Seed Planting

Laser Measurement Flame & Safety monitoring

12

Medical Applications(S b t )(Subsystems)

Retina Eye DiagnosticsPulse Oximeter

Immunoassay testingFlow Cytometry

13

Immunoassay testing

Expanding Markets (S b t )(Subsystems)

Currency validation Counterfeit detectionCurrency validation Counterfeit detection

14

What is Terahertz?

• Terahertz is…A new disruptive technology for Nondestructive Testing &– A new disruptive technology for Nondestructive Testing & Process control

– Safe, not harmful to operators or inspected objects

• Terahertz can… – See through most materials– Determine chemical composition– Determine chemical composition– Measure multiple properties simultaneously

• Moisture, density, weight, thickness…

THz

Potentially Harmful Safe

15

Potentially Harmful Safe

5th Generation Systemy• Targeted at Industrial Process

Control• $30 Million invested in R&D

over 11 years with >35 patents and patents pending

• Continuous manufacturing applications– Paper, plastics, shingles, flat roofs,

walkwayswalkways• Replacing nuclear gauges

– Which have an installed base of 2,000

– Annual unit sales of 500• Customers- Fortune 500

16

Terahertz Markets• Quality and Process Control [Total Addressable Market growing to $100M]

– Aerospace [TAM growing to $20M]• F-35 QC

– Coating Measurements– Step and Gap Measurements

– Industrial Process Control [TAM growing to $80M]• Continuous manufacturing [TAM $50M]

– Nuclear gauge replacement– Multiple measurements for process control

• Automotive [TAM $10M]F l T k thi k t– Fuel Tank thickness measurements

• Paper [TAM $10M]– Coatings

• Package product inspection [TAM $10M] Pharmaceuticals consumer goods– Pharmaceuticals, consumer goods

• Security [TAM growing to $80M]– Baggage/package screening– Personnel screening

17

Aerospace Applicationsp pp• NASA- early adopter (Purchased seven systems)

– Detection of foam voids on external fuel tankC i d t ti d h t hi ldi til– Corrosion detection under heat shielding tiles

• F-35 Program (potential 15 systems)– Panel fit for proper alignment

• Significant time savingsSignificant time savings• Directly measured quality

– F-35 Stealth coating– On-line material QC

I i i ld

StepCoating

– Increasing yieldGap

Substrate

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Channel Strategygy• Components – Focus on high reliability

– Sell directly to major OEM’s, with regional rep supporty j g

• Sub-systems - Focus on mid to low volume >$25K– Direct sales people with US territories

O j di t ib t t h dl <$25K– One major distributor to handle <$25K– Four international sales reps

• Systems - Focus on early adopters with business y y pdevelopment and direct sales– Direct to Military and Aerospace customers

Three current value added resellers (VARS) for industrial markets– Three current value added resellers (VARS) for industrial markets.

• Homeland Security – High volume market under development

19

Company Growth Strategy5 Y CAGR 25% ($480M TAM)5 Year CAGR 25% ($480M TAM)• Components – HSOR (TAM Growing to $150M)

– Expanding Customer BaseV ti l i t ti– Vertical integration

– Homerun potential with Fiber to the home

S b t C t O t l ti (TAM $150M)• Subsystems – Custom Optosolutions (TAM $150M)– New product development

• Market share growth – Strategic acquisitions & partnershipsStrategic acquisitions & partnerships

• Systems – Terahertz (TAM Growing to $180M)– Process and quality control market expansion– Process and quality control market expansion– Establish worldwide distribution – VARs– Homerun potential with Security Market

20

FINANCIAL HIGHLIGHTSN NC G G S

21

Key FactsySymbol (NYSE MKT) API

Corporate Headquarters Ann Arbor, MI

Stock Price (11/5/12) || 52 week range $0.59 / $0.48 – $1.05

Shares Outstanding (9/28/12) 31,161,000

Market Capitalization (11/5/12) $18,400,000

Debt (9/28/12) $2,832,000

Cash (9/28/12) $1,624,000

Trailing 12 Month Revenue (9/28/12) $24,824,000

Trailing 12 Month Adjusted EBITDA (9/28/12) ($1,590,000)

Insider Ownership (11/5/12) 17%

Institutional Ownership Shares (11/5/12) 9%

F ll i E l ( ) 1 0Full-time Employees (approx.) 150

Fiscal Year End March 31

Accounting Firm BDO USA, LLP

22

Revenue and AEBITDA Profilef

$

$35,000,000 

$25,000,000 

$30,000,000 

$15,000,000 

$20,000,000  Revenue

CUM AEBITDA

Linear (Revenue)

Li (CUM AEBITDA)

$5,000,000 

$10,000,000 

Linear (CUM AEBITDA)

$‐

2004 2005 2006 2007 2008 2009 2010 2011 2012

23

Financial Actions

• Focusing on growth marketsM i t i i• Managing to superior margins– 5% to 10% higher gross margin than peers

Reducing labor and material costs– Reducing labor and material costs• New Investor Relations marketing program

Presenting at various investor conferences– Presenting at various investor conferences– Torrey Hills Capital meetings– Corporate media video clipsCorporate media video clips

24

Gross Margin and OutlookgCompany Rank Last 6 Mo GM %JDS Uniphase 1 41 4%JDS Uniphase 1 41.4%Advanced Photonix 2 35.7%NeoPhotonics 3 28.0%Finisar 4 26.8%Oclaro 5 15.5%Alcatel‐Lucent 6 14 1%

Additionally, we see opportunities to grow each of our product lines resulting in significantly higher second half

Alcatel‐Lucent 6 14.1%

p g g y grevenues with improving gross margins

25

Balance Sheet and Financing g• Condensed Balance Sheet

– Cash of $1 6MCash of $1.6M – Net working capital of $5.6M– Equipment of $3.1M

Sh t d l t d bt f $1 6M– Short and long term debt of $1.6M– Equity of $16.5M

• Long term debt will all become current in the next year g yso we are seeking a $2M LTD replacement

• We have a $5M line of credit with Silicon Valley Bank ith b t $3M f il bilit (l li f t $750K)with about $3M of availability (leaselines of up to $750K)

• We believe our existing liquidity is sufficient and do not look to do any near term equity raisesy q y

26

Compelling Reasonst B Sh h ldto Become a Shareholder

• Market Cap near an all time low relative to revenuesrevenues

• Expect near term rebound in components for Telecom and Terahertz system salesTelecom and Terahertz system sales

• Homerun potential in Telecom and Security• Significant earnings leverage in a growth• Significant earnings leverage in a growth

scenario due to high value-added content and superior marginssuperior margins

27

Thank YouRichard Kurtz, CEO & Chairman

rkurtz@advancedphotonix.com

Jeff Anderson, CFOjanderson@advancedphotonix.com

NYSE MKT: APINYSE MKT: API

www.advancedphotonix.com