Applied Optoelectronics (AAOI) 6 Aug 212021 Q2 Earnings call transcript

Good afternoon. My name is Chris and I will be your conference operator. At this time, I would like to welcome everyone to Applied Optoelectronics Second Quarter 2021 Earnings Conference Call. Today, all participants have been placed on mute to prevent any background noise. [Operator Instructions] Please note that this call is being recorded. to for call AOI. like Savarese, to now Relations Investor would turn over the Lindsay I Ms. Savarese, may you begin.

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

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

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

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

Hardware virtually. of on Summit interact one-on-one AOI Semiconductor meetings you IT financial at and moving Infrastructure with to Communications August that XX. hope We have the the announce Jefferies the participate management like Before many virtually will opportunity to I'd to results, to in

date note November Additionally, I’d like that to for our quarter XXXX. currently XXXX third of earnings is scheduled the call X,

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

our expectations. us non-GAAP EPS Thank in joining revenue delivered We you, for with today. Lindsay. Thank line and you

our XX.X% which increased by due product sequentially second $XX.X to component for than MSO to America the strong shortage data continued quarter revenue mostly XX.X%, demand X% quarter. this However, decreased for sequential year, accounting growth led our Total our quarter to mix sequentially. segment increased our CATV compared QX, in XX% an from CATV] environment products our CATV revenue in [to gross their in million. of remained prior in the strong record was margin our our CATV million came experienced at The Total North quarter the year-over-year center was to of below total unfavorable $XX.X we expectations fourth in segment, cost as business, quarter more a of upgrade for a our network. a decreased strong four-fold but increase up revenue in particularly strong the slightly second

As QX we in soft data center generally we experienced conditions the segments. expected,

result, data and of a for center total year-over-year sequentially. As million $XX.X revenue XX.X% products our XX.X% decreased

with report wins our new We customers that [QX design] XXXG are QX. pleased to with products during two for

will had Stefan which in detail. technical our of we five to XXXG addition design In qualification wins, discuss more the products,

by We our are as [traction] to XXXG our the are encouraged degrade. products start seeing customers we with

our [XXXG our begin this, XXXG will we upgrades to expect continue of customers benefit normalize. Based realize issue or our data solution]. in the and second inventory customer the half the the begin XXXG start year performance business increase around on continue as to expect to center We order as to of our

recovery cadence timing segment, in while existing order, as while use of sign the is with QX continue others there telecom opaque]. China some XG condition the in Telecom in the present rollout remain we mixed with do [somewhat [to QX, our a new Overall, inventory. and see of repeat] to saw early the markets we customer market to condition continuing Turning

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

to QX to outlook Stefan review investment to compared continue believe half. half QX. infrastructure and higher of in will fiber-to-the-home this ahead, segment both the of details their that, for Looking Stefan? we the the I first our year, call China make we and in revenue will XG in the to expect With and turn over second performance

Thompson. you, Thank

delivered with mentioned, non-GAAP EPS in-line we As revenue expectations. and our Thompson

and our our costs increased in mostly expectations, margin component However, with we CATV gross the product during our associated to quarter. came unfavorable saw segment, mix below the due shortages in

see XXXG million customers. for total design quarter, were which second center for and winds as we are secured secured three growth our in continued encouraged are pleased and business, market we Total and the the ramp drive and quarter was $XX.X the design looking revenue detail of are design during customers, two we data products the of And the volumes center traction to data are more shortly. the the seeing in sequentially. believe I'll we in for existing AOI conditions While XX.X%, pleased to later XXXG, year. order three by will Notably, in center we with wins prior CATV two three products, second which a In discuss somewhat QX. our XXXG that with we which in XG our up seeing strong are business we results in we compared X% data we of decreased All report remained to China market. were continued of record softness strength wins the year, market, soft, in are among the all ahead, in our the new three

range was in-line to Our million guidance $XX with QX $XX our revenue of million.

center of the normalization in several will year, in half We the the in to by deployments. saw the continued As early headwinds driven home related we last second these the year. working followed into XXXG our that market quarter QX believe of to begin the to subside data the expected, we who to will inventory from shift begin ramp second customers headwinds

inventory that in will believe in conditions XXXG the we Additionally, year. to normalize business later begin our

wins for products during and our the QX. front, we mentioned, secured with customers On two XXXG XXXG as I new two Thompson design

companies AOI design both One the and data equipment center of data was wins was the and U.S. other the are both our existing manufacturer, operator, a customers. hyperscale center with with based

reminder, AOI, from a both successfully an order customer. occurs well for as completed have we the a received of product, initial design the win qualification As as the technical when

XXXG design on completed In addition opportunities. have to also these two technical qualifications five we successfully other wins,

of qualifications that the with the different are All future U.S. from OEM. data optimistic companies. will center based products data these and wins operators qualifications center are design we once become are for many these equipment two our technical We The receive orders near in customers.

encouraged us later X% are with in QX its XX.X% are and we other. generated from QX. traction MSOs, networks. in as particularly telecom, in CATV the from the QX, FTTH, environment year. segment, revenue XXX% prior products, our from their by sequentially, and North the We seeing to the In the remaining up quarter, ramp with remains demand continue will We begin expect XX% was products. million second our XXXG revenue very In that up overall million upgrade in was data $X.X strong, from and center America $XX.X CATV XX% of our of product of

We shortages affect revenue schedules and are additional third improve in suppliers We suppliers. anticipate our with for to components, business delivery these cases, these our still our that component will we critical some continue by seeing adding to CATV million. in and shortages adversely work about quarter $X

to backlog work longer supply than As for we may improve continue a chain, quarters. have usual we to several our

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

to driven our China continued year. products XX% our $X.X XX.X% telecom revenue in by there, upgrades of from QX in slow primarily and Turning $X.X of decreased telecom XG million segment, the demand sequentially, million prior for from

China their markets. we are we well-positioned increase sell infrastructure. lasers will we believe continue ahead, both and both these investments And of into believe FTTH Looking to to in XG

XX.X% our which non-GAAP customers These CATV of or compared the QX four guidance XX.X%, center in customers consistent reasons of I the we XX.X% Top of of which was the prior the which revenue XX.X% had favorably two of of second market. market, margin our total prior the year. XX.X%, QX, XX In below and and QX previously, For generated to the quarter, in greater gross year. and quarter, of for were data of We to XX.X% XX%, customers contributed XX.X% in XX.X% represented two the mentioned in XX% with respectively. the in second were range revenue, XX.X%,

our in on more a QX normal mix before unfavorable in CATV pressure margin starting to recover segment downward the expect product to QX. to through We mix persist to due gross

currently used million of $XX.X million, compared basis, in The million. will per of a of which share, with and loss line see increased QX loss million million share but quarter basic $XX.X a margin. $X.XX XX.X% share subside, of or also of basic Total loss $X.X $X.X prior loss GAAP in to of Non-GAAP operating in share, negatively of disruptions net million for or here. loss the loss prior due net $X.X our million, with costs $X.XX or computing operating in or XX.X net loss to of $X.X supply in $X.XX non-GAAP were gross uncertain of was or outstanding a expenses we per of basic basic with was $XX $X.XX guidance was or the prior loss QX, loss QX $X loss a of We of chain the XX.X% quarter basic QX QX in of GAAP to QX to the operating QX million loss range in was share, compared revenue, were of shares in in a loss range per an net per or the for On per net second $X.X $X.X of the non-GAAP affect $X.XX QX million them through revenue year. $X.XX also persisting are a when million for of to a year. million XXXX. the which the a second will compared basic compares loss

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

for immaterial second We we $X.X inventory, in machinery This $XXX.X total inventory million million rationalizing consistent our primarily amount of June $XXX.X in on orders. long-term the at in levels. is due customer decreased million an production focus had to a with XX, of plan, reduction building we million the to end QX. inventory in $X.X of Inventory As compared equipment construction made and investments as of improvements. capital quarter, including and on and inventory utilization

expect to approximately CapEx continue be We XXXX $XX will million.

as estimate years, prior there noted in year the variability in significant have can we as be progresses. Although this

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

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

Raymond Please with Leopold Simon from comes question first Today's James. proceed. Instructions] [Operator

start clarify to as million you're that, if out this it CATV headwind imagining suggesting be guess I just, think of hey, constraints, I'm but imagining XX, roughly you think was with supply XX.X headwind, for couple be I that. to interpret it'll of taking could would of first subtracting ways one is, but X million from a I X the quantified I the million of it want million could what there looking alternatively, are sort quarter But due Thanks could sales and you question. I XX. headwinds, at $X

maybe So, of details, the baseline I'm finer I trying little understand impact headwind, guess bit you to highlighted. or that the a

up. thanks Simon, Yeah, that bringing for

fact you like to had, we I what could deliver relative and point. and is this you at that answer is in that necessarily schedules, in were we based the shipping that scenario the is, but those So, that, it's on numbers we we more all know, orders had our that but delivered for segment, schedules not more could those are and think TV ladder materials raw delivery cable what are mind, the have $X that, requested saying otherwise million what constrained

clarify me forecast your in headwind is that just let million for And million September? hit X quarter is June or that that, the X

forecast It’s quarter. for the September

So, next more have in current the deliver we're now our based in than that approximately currently, able we can we're component we the one the we to do million been third believe saying in that quarter, on revenue would quarter, to forecast, shortages. $X

[ZR shorter understand think opportunities where products how if the see XXX about maybe essentially, but I help with gig there's, Right. you your the cheaper see, products], you And imagine could want to and us you because your to have in than know reach. I market, competing are probably ZRs,

get so And say, trying opportunity market let's in, idea better thinking just of how you're that to XXXX? sizing a about

Sure.

mean, design the – we made get technical be excited is the progress highlighted typically only just as codes the technical five first noted have up the – we So, say pretty is the had would that things really we involves, we I market, that and design in getting two qualifications, a that. some that would the of as know, all, the we the I about pricing XXX which and you wins over, gig also but an like which, remaining not qualification win. biggest logging typically we're quarter, order, in set proper The milestone, with hurdle purchasing significant in negotiating a receiving hurdle to fact

that piece takes I The longest. So, the technical the really think low. is those key relatively hurdles qualification are typically

center gig applications. a think, we with I be intra of the to we ecosystem, cost we're that positioned you qualifications. you So, are primarily products excited of know, about about, be in question that design the where can respect our the wins had mentioned, in pretty data progress technical used XXX With five as lower and in, version your fit two those kind to

a longer is So, it to you ZR that, distances couple distances targeted. know, in which kilometers, up to of as where opposed typically is

is that for know, the know, going think gig. of make everything's higher they're technology, My that's third like you ZR, incrementally, And overall be that you the they hearing it up XXX in like can the for will as instantly, incremental to XXX it, point that and you is quarter. because try but our to relatively after to a test far later third quarter implement market you know, that They course, estimates typically customers, and at things year, some in to, how ramp fourth you that'll anticipation goes distances, slow, customer to size, into gig particular market start they noted. then what base as working new time, work these expected, know, sure shorter that. party the with Now, sizing don't at from begin that, price, a as you and ramp as implement implementing I a throughout begin it put technology when we're I next

two So, And would probably stronger which I this there. is what year. of ramp the kind is phase, phase in be next middle of ramp would expect part sometime probably a the second

terms maybe the I at And there megahertz China just coming China seen just for XXX related few business ago, might when Right. quick China maybe and out if is, of we’ve then events tenders helping, sense then of Telecom in a should one, improve? weeks and we award a XG how was XG us made to give the more technology, front look Unicom recently, backhaul, your RAN, for wondering some of can those haul awards

a is a out Yeah, I bit mean, Simon. now. great make right market to XG that's little question, hard the

they think China customers from begun to levels our those placing ordering whatever Other products is you down As they're their level inventory comfortable, earlier yet remarks, yet. orders and started we in customers new more that place implies haven't new noted are which orders. our of us, have some know, in to,

is orders I'm that think Unicom new new that are the from to or from orders ready place my, start China to we're Telecom vendors new that draw some China either I and that orders. there's where they line in before those starting have new way to buffer are carriers the probably like starting inventory while other orders our we're, are sight they to vendors to getting flow and some of of flow a – want period I interpreting still or down So,

the orders the are China So, and this points awards turn gradual gave Telecom start certainly by to a that in also bandwidth I the data our out of of recovery the quarter product two. more and should new Unicom, like around of coming point it or in China points and feels quarter or new with that quarter, fourth that think customers you that those significant in direction next data

taking for Thanks my questions.

My pleasure.

Alex comes Needham. The with next question from Henderson

a getting you data – a their that the quarter, to gig know, now XX but spike you to wins, their are new more base be can up give know, in declining know, bit you the is going granularity you networks forward Thanks. it's the going what expect that thoughts business gig a And, that decline we normally level guide stabilize roll are where in the sequentially seasonally line over a or the people assuming out little a and there? of little there? it's it's data and your you products Stefan, should XQ? into and around, bit want, – the to XQ What as trend good growing put is what’s between new a XX for sequentially know, us an normalized or strong you center clearly, don't CATV a back or nice will or XXX abnormal CATV? center faster, little spike, a growth to revenue is into Is

Sure.

in know, As the next prepared $X And the question being So, I'll TV you about about remarks, talked or is, beyond availability. quarter which TV? our limited cable in first, what's first I is trajectory the noted our third cable million. revenue magnitude the take perhaps for your quarter of by that component we over

availability, subsequent at you picture know, So, I that level after and we about depending in you that, quarters after component on in that, get a can should be that, well. say that, pretty as you would good at least know, QX,

also ramp driven the we I same about same that's getting minimum. from as XXXG think beginning datacom, time, in had you we're are level question point And revenue expect time, to is the the begin XXXG some as by previously new remarks, your that to think as trajectory I purchased revenue limiting inventory I factor I probably down opportunities earlier a is going at to calm. incremental prepared placing we us, think our the do there, of second represents see at we'll that which in that about, factors. that some improvement to is in grow wins a low supply overcome So, for spoke think appropriate and there. that One a particularly local is, is data there's orders. and two of least That at in to inventory cable some the the of business, And currently know, deliver business. see be kind they first new, back new these level noted constraints, our some At to in XXXG TV, QX I in then design in datacom and with finally our the recovery the Simon the customers phase

can factors, growth incremental two I think, in some the center data those business. So, drive

like that modestly up fairly sounds off a bit base. of other like So, the Telecom, about of little up probably million couple talking it center a a ones sounds data you're dollars, it’s low sequentially

So, suggest the a bit do expect a to you in get retrenchment to CATV your I guide, that would little that assume? would of

shortages. correct. that's to largely we that highlighted that's due Yes, And component

wanted go relative I right rate get that perfect. And lower much is product, environment, inventory, future any might be this to know, to, or not That's have back to your I it. potentially of, probably products it Do demand industry revenue applicable concerns carry issues to base, you of say, about you have but bad the in relative picture? standards. to speed that's having high the that very and your do a inventory the too we get I not Okay. having inventory to that thing, in mix? older any

I do. think we

You XXXG you of our lot a that platform our some quarters, lot and in know, and the commonality prior of design XXXG fact platform XXG terms the and the a share in we've parts. about if remember, talked our platform

And so, you extent, may older XXXG inventory continue products. know, maybe applicable than and products slower a been that you could lot even the have older to of products, still generation that there's things some selling we use and to know, demand materials that the stuff. to still XXG certainly, in raw of cable well, current There's TV, even generation of for

should about feel I we inventory So, say, that good feel good have. that about the of inventory the the have. we quality we pretty we

inventory got high end and We of that the down probably ahead in we've just about quite we're in down. back on that that little know, actually I inventory terms $XXX that even at think you did that inventory, that we've uncertainties amount your New last comforting have. a We've to inventory a [SKUs] we regard. going significant point prior the period know, is well being point, in I of you to of million around quarter. progress level Year the made $XXX Now, To pulled I Chinese maxed inventory bit think draw our some bit probably, our level taken. inventory of COVID your last out all And, do But year. we the, spring. the around million, with in to want in about that mean, out to bulk-up we – to the continue of it's it endured at have the

good progress on be, down you make is that's number for level more regard. know, vicinity. that progress. appropriate So, I I to business, continue to want the inventory mean, probably that would think million the in which to that $XX bring And I a

the in. you One was the million You or that cash mark at issued, technical shares revenue? of market was question, know the to that market said X.X

That's That's amount …. proceeds dollars. net of the for

Okay. For dollar? the Thanks.

All Alex. right, you. Thank

next question Peterman with comes The Craig-Hallum. from Sam

Couple on questions. Sam Hi, guys. for here. Richard

I'll else quarter burns you have data you worse center. quarter? and even to going expected, looks something second like think happen, starting I guys centers inventory explain that recover with than like I know know, which in to expected. data in but, of data down you the about, given there, that talked it's from inventory looks the than start I there, know, can mean, of was this little kind weakness a more burns center there bit kind or ending

large couple different Well, a to a is, I don't XXXG as that patterns in you some with order of, center especially think the customers, one that I forward just our kind terms think data from know, customers, the I starts And know, we our has thing. confluence with And, across do revenue. well It as excuse the XXX to some you as gig, of minimum of represents think, know, the long-term we, discussed, weaknesses a know, of inventory normalization local customers. of you as ramp. probably me, headwinds, that catalyst tailwinds going is or again, XXXG as you

Okay, fair enough.

those on qualifications technical talked XXX you can you five Second existing or customers, break that are about, down? customers those with I'm what curious new gig, that or question

existing of All XXX are gig the technical qualifications customers. with

great. Okay, of you the yeah can bit, the all, would terms out supply books visibility And And and in is any there today? be sit where about talked last Thank for order you. you end the year. know, one going in color if but TV. cable in helpful? visibility know, you I you know, having, a think you to me year extending cap of then are talk out that at book order that about last constraints know, I through I on call the next

and Yes, the call, order mean, I situation, component availability. availability listening saying the on The is about in I extending next year. was they're CommScope’s things component book similar in out

So, think industry it's, I trend. of wide an kind

So, pulling of we're order not seeing customers, sort orders shifting and back on patterns.

quickly as to we're with quite are, think else to they than, it's the trying try pull as can, that us you something. know, somebody you experiencing customers is orders to know, rather to or contrary, move inventory I working what in

all Okay, great. me. That's for Thanks.

from [Operator Our Dave comes Riley. question Instructions] next with B. Kang

be, first go Good flattish gross My factors? going you. to you're is over is you third just Thank by margin. sequentially, of five quarter Revenue margin kind decline afternoon. on expecting to question some of points can the and gross sequentially yet in

two the cable other One waning product is, sort some just the there's terms our segment, we're component of know, to factor experiencing. buying. shortages that they're different of factors. within Sure, And is, in you what waxing then customers, mix related and is TV

costs we And in we are components. experiencing as so pull to increased those try

cases, for we're some So, they higher margin new expedite things suppliers in to availability, quarter. suppliers, impacting example, suppliers paying, that just cost also be gross because even negatively the that may are qualifying that, like we're fees our in have

probably one discussed we is cable think the thing. that So, TV that we mix a quarter

you favorable I towards, little last. think long mix the bit fourth quarter. a in to more is back The is know, product going it'll shift how availability component more unclear that

fluid fast quarter, that. situation. certainly into the third It I recover to it's going fourth last It's a be last to not totally very think clear may we're but how the from through it'll quarter. exactly able

– third shutdowns caused those point. for those it's a totally in factories suppliers of in component things should out, find world but the think it, through bit say and by COVID terms have parts quarter the clear point. this hopefully, is I persist of to difficult Some situations project But those quarter, little of and where not and fourth availability to example, it's it things, ways the timing in fair at around are certain this it at how play we'll

similar Regarding experiencing cable the market? TV, I mainly component it in not you're situation data a center just mean, shortages, is in

with I about talked we a and a has do made inventory levels we've I the think that Alex very that are lot last Yeah, that's point had to point the calls. of that also And good earlier. few our elevated. our on mean, that rather inventory

if I shortages. risk tying obsolescence, know, course, mentioned, is cash. inventory, there's from You do you're think a you bright response concern that know not side supply Alex's of And although, question, major likely suffer point. double-edged in to up us at that's the for some of sword, we're to I have that's you a to this But, don't then as that, always as

of and to know, where and that's we smaller able last you we you of of and second of order So, where year in track in was more, quarter we don't there. those continuing the times business And help Chinese up New record a to grow can shortages appreciate, in inventory of history a a bulk therefore, the a as the know, to going comes have, bulk first year. TV, know, of out part ago, component we're, find cushion on have inventory the into, when have we patterns, revenue know, longer that into, And that same year, you going inventory scrambling you data our products need didn't know, were sort Year the same significantly cable continue segment. business, better that terms you The ahead present to it that center last or we pre-COVID of inventory try in time. the to from to to you is us

be Okay. on I'm And gig. is gauge last should trajectory my we of of to, XXX what kind kind question expecting. trying

of end First talk when you like, third XX% And XXX can do quarter? you know, to you expectations? just then, it become gig clarify, will or just fourth revenues? say – your does [indiscernible] did of all, say Maybe of you wanted about ramp quarter

ramp was quarter. start in gig to will fourth – revenue it's big third of believe you we right. So, should I end to, the did amount start the XXX answer it of quarter, also phase see in going I be a the a of to think question in know, know, not which means meaningful quarter, that you but in the third I that I at probably the said highlight more it become, sort start Simon's scenarios, ramp, to, these typically two to earlier

once these all when we some to in number the relatively comes their testing ramp, everything's been the comfortable in appropriately phase. in that's well more become part be, initial year. where in making the doing will did the and probably phase that working becomes They networks And we then small from more correctly, there's middle it that to that products they circumspect are of of tend you environment an they with putting know, the qualification customers substantial initial phase to next ordering and associated sure then live phase phase. there's know, second first So, lab where ramp sometime they that expect be who in that zero actual trying perform orders out, that they've as you from as into go

one between about we can just And XXX gig, think regarding gig? more if margins versus how I XXX gig in XXX squeeze should

gig and I can you particular, margin in between types the are similar, the XXX Broadly to broadly you the gig the particular and product based the know, on be, either of margins XXX being ordered. customers gross would be that particular that similar overall, XXX there transceivers XXX gig family or variations know, But expect gig. among

Got it. Thank you.

Northland from Markets. comes with The next Tim Capital question Savageaux

Good upgrade XXX and timing ramp and the afternoon. that's the of where some know, like up that would in maybe, if coming, ZR you that a of not you're inside before area game; you that. that, that would discussing? going are seems kind I’ll discussion in b, be design magnitude one I'm you and that one But add it they Not they a stated pretty guys can wins of of be lot need left design here, center. XXX the you DCI kind explain scenario on of on follow the maybe plainly Microsoft, a kind the where the then small And rollout bigger maybe of get you but mid-year type relevant scenario wins, gig why at they've kind opportunity, with could] late data saying to a, of support ramp little know, know, [but for color your

of been customer. It customer. our I Yeah, if not center one sense you're our the data Microsoft for our largest has data in and center I it think all customers, historically has recently of that right, largest been certainly mean, has – been

the be that and That's partial that have efforts, for know, of us are would certainly situation certainly the And so, some the a we their you that of qualifications any the you affect interest of affecting know, know, Microsoft, we you and Microsoft's design be we and say, to that had explanation of them or watching likely that factors are of in rollout be technical Microsoft, could all but rollout the to involved multiple earlier. affect would magnitude ramp the not plans that, have we're in but us talked timing well. even anything rates with not necessarily of certainly, about with any customers as would XXXG

Got go it. on sometime you mean, XXX terms in your size opportunity, a you business of And, center I gig? data current imagine XXX you the for that can where your well things year know, of the reasonably is, approaching magnitude basis? next in a you should overall of quarterly scenario know, know, you gig business

I that scenario. could imagine

you I think, that approach, at which gig some the pointed expect XXX XX% of would right. it business. next lot data our of revenue current know, roughly of a put to go know, center level point you year, would as out, you I at, things can have say

ways think a amount that from tremendous that Clearly, out I that's, it's So, achievable. think you that, of know, happened in having seeing but little we're a confidence and I actually possible. certainly

and wins. much, design very thanks the on congrats Okay,

you. Thank

would remarks. back session. to to Thompson this Dr. At like the I concludes question-and-answer closing over for This our Lin, conference time, any turn

today. Thank us for Okay. joining you

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

attending concluded. And The now may Thank now you is today's for presentation. conference disconnect. you