Applied Optoelectronics (AAOI) 7 May 212021 Q1 Earnings call transcript

Hello and welcome to the Applied Optoelectronics Q1 2021 Earnings Call. All participants will be in a listen-only mode. [Operator Instructions]. Please note today's event is being recorded. I'd now like to turn the call over to your host today, Lindsay Savarese. Ms. ahead. go please Savarese,

AOI can Lindsay its to Relations first welcome call. financial closed results I'm its release and quarter for first quarter recorded will Applied second the be AOI to ao-inc.com. I'm conference This at XXXX today, market the the company's pleased you and quarter of After a Savarese, website you. Investor link press the XXXX. on for website for announcing A The is provided Investor found results Optoelectronics, financial release issued year. outlook and being Thank Relations is to AOI's the the live. recording also be available on of one webcast call section archived and

Lin, Dr. Chief overview CEO, details AOI's Founder, quarter question-and-answer Joining session outlook Stefan on give will Thompson results us Chairman XXXX. and for Stefan A the Officer provide and AOI's will our Thompson and remarks. Chief Strategy Financial prepared Officer. AOI's QX follow an will financial today's call of Dr. of the Murry, and and second is

events intends, believes, will estimates, In uncertainty by you would, future or identify can and similar like uncertainties I anticipates, assumptions current by review statements. we expects, should, cases, actual such company's will materially expectations forward-looking forward-looking some could differ forward-looking AOI's that risks those other today's call, to statement. as would anticipated in as remind statements. outcomes. management convey thinks make you begin, These involve cause such the from forward-looking statements statements plans, of or Safe terminology expressions as could, Before well Harbor and to On which predicts, may, and results to

basis, with otherwise. company's reports on are annual the all Form intended today including Non-GAAP law, no markets expansion XXXX. ended the with noted for second regarding as expectations of customer discussed by non-GAAP management's revenue, year regarding and file SEC, measures the Also, well we statements specifically the report are be reconciliation products as for financial also of responses for statements date earnings company's any new forward-looking of about company's beliefs into Except expectations. changes statements non-GAAP statements the in in the measures a that the the conform on of after discussion the accordance financials or actual quarter information Factors our impact XX-K are outlook and unless on December may Forward-looking these update XX, our company's of or to company's not this exception a release on to reach in XXXX. our assume section as are Risk considered measures to available of forth with of the reason in our present the to and substitute innovations GAAP. our non-GAAP isolation as to as set More the risks well other A required between obligation press included include website. that to prepared we related earnings statements a is for results financial as results the call business why to GAAP in

on links you and Cowen Before the participate X. May of with opportunity the virtually. June at on Relations be to moving AOI be Telecom this to results, webcast announce to Investor Conference Technology We & I'd Media hope and the Conference that management will will Needham XX section of of financial like presentations the to & The virtually to the many Technology, on Media AOI available the conference will have interact website. webcast live Annual

currently quarter XXXX of scheduled the call X, earnings date note August Additionally, XXXX. I'd like for first is to our

CEO. Thompson? call Applied Optoelectronics Now, Founder, the Thompson Dr. to I turn and over would like Chairman Lin, to

We gross the loss delivered quarter anticipated. and per today. Thank you, revenue margin our and our the narrower line for XX.X% with in Lindsay. we quarter And fourth in to sequentially. revenue down Total year thank was than fourth prior expectation X.X% non-GAAP joining $XX.X and share of call you the a compared grew for million

soft center generally [indiscernible] QX As in conditions segment. data the

to our We upgrade center half continue their was MSOs, of to for our particularly increased In level sequentially, prior-year North quarter, the XXXG the quarterly of years. previous and This revenue Non-GAAP several our demand as was a business segment three range to as four in for And XG XX%. environment around highest of times deployments XX% and customers the at China this million. $XX.X the overall from expect our revenue year data in gross begin networks. to guidance, margin narrower fourth increase upgrades was products its strong normalize. issues per in inventory Total XX.X% our in XX.X% second CATV CATV off [indiscernible] guidance was to strong than XXXG our $X.XX come loss segment, non-GAAP America, in increased is net than more telecom with share. of in almost customers.

a the started we fourth As in we see nice to recovery quarter. anticipated,

of revenue and XX% up sequentially. a year-over-year million As result, XX% from our $X.X telecom products was

both that, We Stefan Looking I to in sell ahead, to soon. QX. Stefan? over we With we for person the make China believe the their these review investment will well XG our forward and to call turn meeting and lasers believe infrastructure. look to to are performance QX probably markets. fiber-to-the-home outlook our will details And of again in both of in continue we positioned

you, Thank Thompson.

as share non-GAAP and As we we Thompson our margin in anticipated loss played a delivered mentioned, expected. market gross narrower anticipated. and out revenue dynamics expectations The per than we with line

the in In center quarter, design were two While Among recovery data are see design media operator; compared one customers. customer, we quarter center including quarter which year. center revenue and the our with within market, large, the based we a social business in of market. telecom for with XG in first we data CATV the strength prior four win total, nice the $XX.X softness was first wins market secured our design among FTTH four pleased segment. US the the grew other to to million continue XX.X% for business, first one in new we data the and saw focused new in our Total these the a wins, four in continued is

fully the sequentially headwinds following Our million the in line We QX down from currently are of revenue market persist data $XX was as believe customers several improving seeing and the with the our and year ramp begin and XXXG second beyond of half center early through normalize. $XX later the inventory to year inventory half year X.X% to of million. guidance will to the first XXXG our related the the then was begin our that home shift in working last in in range conditions business normalization we and in to

to front, continued the delivered qualifications on customers samples new we have On work quarter. and to XXXG the during

also with to from we the customers from from We quarter, CATV our several XX% products, and and FTTH, deliver these hyperscale from remaining was as the was are revenue XXXG to center well. XX% of inquiries have received our our other. In samples new working customers products, data for products first telecom XX%

center the the came revenue and in transceiver in first products. revenue center quarter, from year. of million XXXG In million quarter products prior with from XXG data was at compared XX% $XX.X our our first XX% Our the our $XX.X was data of

million product strong XX% $X.X overall particularly to up of CATV from their America, our and XXX% MSOs, to of prior generated $XX.X revenue networks. up as in demand Turning the continue the sequentially segment, year. in environment upgrade North We remains million, QX

that hamper we products, to a ended these ability our adding quarter we which revenue, typically to growth our seen to our working component quarters supply. CATV Our longer-than-usual will in in going improve record shortages. strong business, seasonally work in while our highest first additional suppliers. is history. do We we some delivery shy have backlog performance which our to not quarter, continue anticipate for some We're was In may with represents a forward. to just to with but the CATV and and drive components, down shortages CATV these first schedules critical the of for we company's for suppliers several continue expect segment backlogs We improve quarter have the to continue of grow cases,

we of increased revenue products year. million the of QX XX% in our million $X.X from $X.X As prior telecom from sequentially anticipated, and XX%

in ramp outside markets. as Looking ahead, and in areas to infrastructure we make investments the is customer Also excited a China. success to our XG beginning China of believe the first we positioned have with spread these from China to that will we to regions design see believe of well outside and other XG into continue XG during quarter, We're received our begins based itself XG to notable of both both FTTH customers had to are sell China. lasers when we other we their

$XX.X million in XX first revenue in significantly revenue or quarter, expenses prior segment generated two XX% the of non-GAAP the largely to represented of top which operating of first as XX%, total prior or to the XX.X% market. year. margin related were first greater of the QX guidance the gross CATV of quarter increase in For We among prior several this were was and contributed XX.X% top QX XX%, line to XX.X% XX.X%, with quarter, customers in XX.X% our we or customers the XX% XX% to were results customers compared two compared non-GAAP revenue This respectively. compared center strong which in Total in the in revenue revenue to CATV These our in revenue of and XX year. year. quarter. had of with of customers this QX, is XX% of in increased of range $XX.X data and QX in of market four the the which XX.X% the our in In contributed million XX% customers

$X.X loss QX million first As year. operating per a GAAP to loss QX in loss million for GAAP of or computing million. in totaled first loss of the On or of $XX.X million operating $X.X an per the we dollars experienced $X.XX net a the $XX.X of which the than share, of storm for $X.XX narrower net or QX QX of prior $X.X loss a for $XX.X and year. we additional of in which a a cents on in of net share share $X.XX outstanding loss call, per February, loss in a million share of loss $X.XX costs net basic quarter the or loss that basic the per a million. to during in range were XXXX. to was The loss our with loss $X.XX or of the of due net share, the basic basic a loss to guidance QX $X.X million basic compared XX.X was compares shares was non-GAAP Texas in basis, million $X.X historic per range Non-GAAP quarter hit mentioned compared used prior basic million of was to $X.XX $X.X million loss QX QX

Now at operations. the fourth end first cash. turning We restricted in to total $XX.X equivalents, the used and million reflects with balance cash, This of the investments the $XX.X cash for and with million quarter sheet. compares in quarter, short-term million ended cash $XX.X

on our reduction expect be largely all we in as capital March decreased especially inventory China machinery, utilization can to million significant at a completed heavy done. gross we end building have of $XX as $XX.X for investments although, on on the QX. approximately would in update in compared million prior million year is $XXX.X that levels. construction currently of variability construction progresses. in in total, is CATV $XXX.X consistent in orders, million, XX, $X.X and facility As rationalizing we telecom I be improvements. proceeds, Inventory offering as there of to made we years, program, as like inventory $X.X plan quick We raising of the million of $X.X and to we XXXX. including increased. with quarter, total our with have inventory in In this had in production to noted products announced and complete including the CapEx raised This $XX XXXX million long-term and total of due million in To date, provide construction on a February this a focus million new we The QX. equipment also inventory at-the-market estimate the

new As equipment investments this to and initiated use at-the-market we $X.X including we make business, To We and use. we have raised research have continue to offering. and in February, the in date, new million these disclosed proceeds production new a intend program. machinery under to for development

Moving now to outlook. our QX

be between $XX range XX.X% QX million loss to to between session. $X.X will average $XX and in turn basic non-GAAP be million net the Operator? XX.X for the a the to XX.X%. approximately over weighted and loss revenue range With $X.XX million be non-GAAP and per Non-GAAP We million and using to of shares. margin million $X.X is share in to gross expect basic of that, expected Q&A back count it $X.XX, the to I share operator of

Instructions]. [Operator question David from first And Kang Riley. B. comes the with

could I This you in Danny talk Dave. was guys is about the landscape on seeing. XXXH if competitive for that guys wondering you are

we tend competitors be what from to Overall, landscape said strongest with in at XXX calls. consistent the as expect that any saw to think competitors there prior we've gig pretty what at The to the don't continuing significant It's I be XXXG. change be there's we well.

the was But negatively how guys that wondering wondering expect we I it said guess guys to you revenues. on – persist? impact you guess situation, shortage expect were don't can chip long I I that you to

a it's little precisely. to hard say Well,

I persist least to quarters. it at in it's fair it expecting that to we And revenues. we aren't result say more correct couple you're reduced expect think that to a

to the we we're sort expect can next component be We to but capped which of continue couple at on availability grow the in based over to probably grow rate revenue, able quarters. just

it to becomes say. that, really hard Beyond

problem expect, if it then ramping telling probably come we're we're year all that the demand this cable TV through year. lasts production two quarters. bit Our – really we next is a have. at fruition, We're looking adding good up. to maybe and that, think stretch suppliers guess, of also as good to that. beyond and up seeing us I against capacity us could are you I businesses very The nicely longer If it plans a growing say end than those picture, they're into And for and may

certainly harder it's demand because catch so, higher to by for the several up last in our seen getting we've suppliers And hit they're years. than

So, sharply of demand shortage. supply is it's that what's combination and things COVID with due of the together those somewhat a considerations, to increased causing two reduced

imply And throughout you also said into year, next this that you'll so XXXX, CATV? from does momentum see

now, in going there's Right out, being slow up a down much no the CATV the year. MSOs little next And still to in of are of pretty indication that bit murky. upgrade even start their the through that's Obviously, But think and quarters really at we're upgrade beginning the that's booked end a I some to of year. few process process, yet them earnest. have the

think to that expect take I to years several that it's process reasonable complete. So, will

Not we'll XXXX. strong see yeah, so, that I just pretty performance year. this And believe into CATV

And Davidson. the next on question D.A. Diffely comes with Tom

are you the quarter. puts second the color I wanted center more quarter level? on of what little a you it'd to know data just just confidence a and what the ago, gives in get the kind recovery the takes thought second But in I half. be maybe and

anything's outlook. changed I our wholesale don't really in think

inventory situation, bit think over of just particularly I the taking earlier longer than we inventory resolve hyper a the itself one with scale large customers, thought. our to – little is

expect to a then QX, some at it anticipated. we than point We later recover probably but in it's little earlier

change than less from It's the little what earlier revenue expected. generation from in a customer, for total that not it's had what so, bit a And expected. earlier – at QX least we we big

with to interest. new that to the The the expect us increased customers. take were continue I ongoing today, And last is the expect front, we several on successful us discussions as we're going the those good We and that well, we already to during continue qualification starts had is go that remains and quarter, the hold several can gig customers of in our to and looking looking come which customers prepared as approach come that see talked that with samples, I growth to qualification a gig about cycle think mentioned our remarks, efforts. to what indicate for the call from from seeing efforts. XXX efforts to that conclusion on really we begin XXX true

XXX the the year. itself quarter well. as second to then, late second about, the half also so, in good that very ramp. And about second again, of that second in of The customers, in with excited gig one telecom, we resolve for we're inventory large our in And TV, talked cable the a even should situation mentioned, half looking fiber-to-the-home as seem I half be China ramping

chips shortages chip you custom, provide? of able a the to Maybe would the the you little how details types on color particular most off willing, if characterize Are or might you're acute, whatever there shelf, shortage. more is be where

the things trend very, I last there's multiple capacity. fab the the gamut it a little of other seen time, same very, And fab at and by caught seeing edge it's the off shelf unprecedented, we're that by all it. way actually we've we've think things general, of surprise not than easy years. listened seen common suppliers cycle. other that It's got unprecedented I I characterize that But shortages some several higher think the just calls would capacity and some different but technology In And just very cutting maybe – our necessarily industry to seeing across are last just in we've maybe seeing chips. say, And not chipsets tight shortages across runs a I cases, that. – there's no on. is certainly automotive of it the very on were kind in this stuff are think earnings tight that new brand older we're and industry. demand in we're what And bit really as kind across in one on

prior of supplier in some drop in a components whereas a of gaps have there that into existed been there already because might able production time. slack wafer to So, run were times, these some a one schedule or

Now is non-existent. that slack just

And production to than it get starts longer so, it's therefore, had in to for going, taking new years wafer that and longer ramp up been them past.

next [Operator Craig-Hallum. Sam Instructions]. And with comes question from Peterman the

Sam past to about. a customer – data a just more dollar want of the first that's you've fair then, like to trending the Richard. the basis, largest was that's lowest in center this how case, little if center. sounds It want And the customer years, a data bit your over on course data as year is in see quarter, ask about the largest for your two that's guess, or there And if if I quarters would This looks on to ask that curious on I center you sales customer sales from had think recovers. like. it XX%

and, was everybody's resolved be inventory that anticipate that customer of as XX% that waste we've not the earlier questions, couple one our that We've do That customers the again. in will won't over again, of And calls. so over time in has here the situation. the we and about, customer. our ramp. second portend I once last half talked talked remarks reiterated I of But second prepared an on one going quarter the And about in it

in the could how we Whether curious second then from perspective? out and business to in it's or helpful. be to of talk there's color kind kind kind I'm expect up upside step your there XG you half, you a what more of half? would of some could the of Any XXXX? point And Telecom, half ramp for that in the at second that On linear ramp about between if see second with roll XXXX starting

we're Certainly, see I half half. But part already think back we we second incremental a of stronger XXXX, middle levels started say, we've than to some last first where think let's expect the not I to improvement. were, year.

able in business a in progress room so, mentioned And We're in we've very that FTTH also, up China to I have is there's been to design also quarters the And And several well, that's with I we be more excited lot we're about China, perhaps successful I that a well. up. the China customer of seem the outside as world? about first And that's the okay, in some last guys think there. that fact a remarks, these to China. be within XG. seems XG some customers exciting, our made I of think evidence doing over China But provides of question be come grow tangible that our know very that is, the prepared also calls picking the with win rest than to And market well outside you but the that's on what as exciting.

from Tim And Savageaux Markets. Capital with the comes Northland next question

questions. couple A of

single-digits you sequential segments, maybe given look and of see at across look well? primary you sequentially, As your TV like progressing? your it a center sounds of you data QX kind be to growth, getting you're to cable guide commentary, how the expect as that do you as driver the up mid telecom Or that high little

on will customer I think can of at it'll We center, can particularly point some terms be some it remains the in set with, that revenue much cable seen sensitively kind the Telecom, pretty actually how think next how it in but again, the quarter. that again, are the grow we've in or mid in TV trends resolve the really late the fast growth to that's this certainly book in it revenue But there. they inventory – good And fast the believe inventory. this much in quarter happens this trajectory how whether quarter in be of quarter. issue how going depends we data can far. to so quarter, I seen see we

of And picture. forecasting in card wild so, the that's the kind

up follow wins. on design to Just

said or I'm for out center, correct me new customer? Opto? customer is called you wrong in fiber-to-the-home the a there. data customer former I XG, one if Or think data is perhaps Applied a two you the one there, But center that and

that media brand haven't California-based, sold before. center we a No, customer data It's operator. new focused it social is. a It's to

to the any you. question-and-answer session. like I this to for over concludes comments. Thompson And Thank back would our Lin closing conference turn

thank joining for you And Okay. us today.

employees you investors, conference. investment As for always, continued you virtually see to at many and forward upcoming your for we customers And support. of thank our look our

Thank The you. you for attending has today's conference Thank now presentation. concluded.

may You lines. now disconnect your