Applied Optoelectronics (AAOI) 6 May 222022 Q1 Earnings call transcript

Good afternoon. I will be your conference operator. At this time, I would like to welcome everyone to the Applied Optoelectronics Fourth Quarter and Full Year 2021 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker’s remarks, there will be a question-and-answer session. that is note recorded. Please Instructions] this being call [Operator conference to Cassidy I like the over AOI. would now for turn to Relations Fuller, Investor Ms. begin. may you Fuller,

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

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

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

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

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

joining and call Cassidy, thank you, today. Thank you our for

EPS expectations to and expectations. revenue non-GAAP Turning gross above line quarter, and in delivered with we the our fourth our margin

demand increased market. we X.X% the our environment revenue as higher During slightly in million and early year-over-year overall we CATV increased XX% million. to orders throughout up see in compared year CATV strong fourth into in $XX.X QX. segment remains conditions XXXX. the demand see and to telecom was was and for Total quarter the strong the year-over-year quarter, and Total of continued market The improving CATV $XX revenue the activity to

We revenue our year-over-year of decreased major several sheet products continue in and purchase, XXXG, several report of the elevated AOI can and center center Total our that are XX% of strong stage. by during hyperscale sequentially to vendor still products. We is for add these run capacity XXXG $XX.X to as early their customers million a additional very sorted on pleased XXXG demand. the data our notice to I'm customer working our a middle quarter, for as while reduce and of XXXG customers XX.X% to next-generation XXXG data balance

customer have led We needs. we early significant this finer transceiver of company's supplier XG Pending expect other to with completion vendors, and the been a deliveries in historically have their testing XXXG a and begin with prospective long relationship interoperability early or the in QX. with in QX of orders QX

win, center will QX product was gas XXXG Stefan which hyperscale During to transceiver the With our review the secured over of the design new and details QX. outlook that, for operators. we a for call quarter, to fourth performance I turn one Stefan?

Thank you, Thomson.

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

in saw During the quarter, CATV the the growth telecom market we and in market. conditions continued improving

data transceiver design operator. for XXXG During center the new product quarter, we win, hyperscale a secured a one

center was report As Thompson major pleased mentioned, AOI our vendor of that products. hyperscale data selected we as a another several customer by XXXG to are for

X% this customer supplier have a XXXG and historically prospective company's a have testing the XXG of significant million QX. deliveries compared with other quarter needs. Pending completion with vendors, and of finer interoperability in to in quarter begin revenue early been transceiver relationship long decreased earlier $XX.X to the late increased their first in orders the We XXXX sequentially. of expect and of first X.X% Total QX or with QX we

data line the revenue was environment our center XX% to CATV particularly our from the MSOs, our million X.X% of million, demand quarter, In products, generated guidance million. with with networks. of CATV XX% $XX products and XX% additional Our overall sequentially. telecom continues up products, QX and year-over-year from capacity FTTH, was the their XX% as of grow our range revenue upgrade was North remaining in $XX first to $XX revenue up other. our CATV to in continue purchasing America, We segment, In from

increased production are most The compensated negatively have the our a QX the days Year impacted that CATV in added, growth CATV holiday during our As loss slight New which typically reflects results occurs where more Lunar by reminder, days. are for in loss we of products in production China, that the sequential than the capacity produced. of

our visibility orders into backlog to XXXX continue we CATV good throughout with ahead, and Looking have XXXX. stretching we as see

market working our meet likely Taiwan highly factory We additional this both in add in to XXXX. and are capacity conditions demand. into We favorable our remain our CATV growing China the to factory are believe to

Our sequentially. down our center came was In transceiver data our at million, from from QX and data XXXG first X.X% XX% from revenue was XXG XX% XXXG quarter, of XX% center our XX.X% XXXG year-over-year products. in products $XX.X and the and down revenue transceiver our was products.

pleased sequentially. up market products this segment. China year-over-year as Now X.X% rebound turning telecom telecom to up was Telecom and from of XX.X% were the quarter see telecom to $X.X million, recovered. our We Revenue our

the environment however, Looking especially ahead, China we lumpy given due telecom in remain quarter-to-quarter, revenue challenging expect COVID-XX. to to

of customers of first decline down which XX% in CATV were We the chain. year. XX.X% revenue, or of QX QX the mostly in our greater in with guidance at QX QX represented due from our year. XX.X% margin generated XX.X% in revenue, XXXX. the the had the The continued million, and to XX.X% from and gross the quarter market was of or contributed respectively. non-GAAP in down gross center the prior In was range in data XX% These margin in For first first our we market. quarter, of XX.X%, XX.X% XXXX million total or operating down of of one quarter, to of top non-GAAP of the $XX.X revenue two the customers XX expenses challenges in XX.X%, end supply and XX.X% customers in $XX.X prior slightly and revenue, high of of from XX.X% was XX.X% one QX, Total

compares loss range guidance loss net range share per to and operating of loss share, to in loss an a net was for $X.XX or used of share, $X.X than was $X.XX of million, operating QX our loss GAAP $X.X rest million was of net share basic QX basic to to loss the GAAP shares the net QX expect loss loss million to computing our of Looking of million, of non-GAAP basic compared forward, the in $X.XX basis, better million of $X.X or QX $X.X On The outstanding or $X.XX for or the basic in a prior year. XXXX. million $XX.X with we for $XX prior of for which in $XX.X in loss around in a share loss quarter of per compared $XX.X non-GAAP the a per per the $XX.X net million, basic $X.XX year. QX per were a Non-GAAP million. hover a year. $X.XX of million was of a operating per first QX share the of expenses loss or quarter a basic loss million $X.X a loss of per

in million cash. ended cash, quarter. the quarter. balance sheet. total of equivalents, with restricted the and fourth the compares short-term to ended up million, with million $XX.X end $XX.X cash $XX.X quarter debt from the quarter This total last the now of $XX.X Turning with investments million at We first We

a machinery orders. March Inventory $X for $X.X to the building due in XX, million of of capital we inventory $XX.X made first million including and customer construction in million quarter, $X.X utilization in investments QX. in primarily of and the inventory to We of at million production end and equipment improvements. As had in million $XX decreased, total compared

first saw from significant I in supply guidance, throughout discuss the QX, to turning see We supply not did like environment. we the to continue would constraints lessen and quarter. impact shortages to chain Before

of for affect Shanghai the our towards products. However, began end of suppliers CATV lockdowns the our to in quarter, several

China shutdowns million. this impact approximately We do expect conditions expect We revenue in will by these in our recover normalize. $X that revenue negatively delayed once QX to

our Moving QX outlook. now to

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

you. Thank

begin Richard Instructions] Shannon session. now the Craig-Hallum. will go question-and-answer [Operator from We comes question with ahead. first Please The

queue the on me getting for thanks Stefan, and here. Thomson And you. Thank Great.

starting it's guess quarter. a Maybe see, of guidance growth least, Stephanie, for of it just of the mentioned cable sounds a primary quarter. Can about from you maybe that's verify million and mostly impact? couple -- some sales Let's the the at of I of questions. would second talk the with you're about generally relative like for TV. of impact, seeing speaking just And $X chain sales then, most you the where that segments each your supply

Yes. Sure.

the to was to So we have was Cable constraint. it you that million would we chain That that due $X and result that issues TV compared our in product, to mentioned. called hit China, chain to as related what revenue expect we about supply supply in out otherwise

the second your -- with relative... As question had to do you

Growth major leads segments, center, within your... to that et TV, the cable data cetera,

sure we XX-gig I XXX-gig because noted in a has But mentioned hyperscale bit of and in one their that growing new our we're customer just going center ramp. is. I'm XXX-gig. that mean, are prepared exactly have selected Data for remarks, to on notified the what And be as the a of us remarks, just started reducing that is vendors, many been us has for to our cable clearly, decline, we a spend not We robustly. of customers our TV in prepared question Yes. relatively their, XXX-gig.

or start won't until news, noted. early So in revenue we QX but that's later the that QX, good as for

we're of bit the little the a business. center seeing in meantime, data in So decline

business, On did the note grew business we the that telecom substantially, telecom sequentially.

in China. However, most growth is coming of that

past expect be So to what basically expect. that's telecom that after COVID few the sustained that situation that's cautious really trying I I especially project The get seen. China, China not last we've period. and we that going continue can that to with expectation exacerbated in And they definitely to to We've least lumpy said up down. of the about to want for quarters kind would there's growth be the in And what business forward. at be until

helpful. Okay. That is

the with said win, we on -- notified using comments few on word this. your time on of or it you details the Is major of design from you over And supplier U.S. you characterize you versions Can you which to a what do international one hyperscale of XXX-gig, the think then there? I as win? describe dollar expect Following way this kind opportunity a not just -- the maybe be hyperscaler. a of you're period any up XXX-gig but a or see

Sure.

it's historically So data a center been customer. cases, and largest in U.S. It's of, one customer. our some

figure know it what don't as finalizing opportunity a I of for there XXX-gig on the sizable testing. haven't We types We as -- we're exact because it as in exactly mentioned be pretty interoperability competitive the remarks, put should prepared dollar out I we disclosed far yet my And products opportunity. an reasons. can't goes, mean, still

again, And and relative other we difficult project is, know so is it's the their largest for supplier potential AOI. players would certain our kind customer note, of the product. to figure XXX-gig, that I this who this I a including we what for But and that's of applications, next-generation done until been is at historically and positioning are were their dollar their mean,

opportunity a sizable it's for So us.

I appreciate perspective. that Okay.

us you picture kind levels. is from to last some a Maybe of obviously, like the of kind of seeing question bit about path growth that, see about kind then, big next something here. of can Just happen you, thinking your require scale, here you improve to happening? margins these you lot I how with sales year of one see breakeven Stefan, should obviously, presumably the that how we that? of model that gross a give some sense you breakeven, some What's big talk And little or kind maybe Just for question for of your the possibility think investors see going a if now?

we the at our of kind a as a where to mean, expect about they in said been historically be Well, while. remarks, have for prepared I I expenses operating $XX million quarter, stabilized

lingering math, as in that growth gross all frame you that, terms exact had We COVID or to from concerns be there, back So million certainly any can growth range. will sales, the then out in can obviously, breakeven getting to and gross doing then to and to get project but certainly hard you we circumstance figure time supply require the margin. for we range And mid-XX% it's call of the in all reasonable $XX need we've mentioned, back issues mid-XX% an put margin. time needs It's on that, it discussed margin to gross the under we to on the in margin. in given higher but revenue, last some that think difficult when be

on So takes that's puts and of the kind it.

away. of line jump me. for I'll and Thank out give That's great you. Okay. the queue

Okay. you. Thank

Craig. you. Richard The go comes with Instructions] next ahead. Shannon Please [Operator Thank from question

throw your more Thanks. in within data one segments. I'll Stefan, here question center maybe

if is about declining of I business degree. you're that in calling a some weakness think talk here. over XX-gig, sure out can of time business here, you most here to this a your probably flat kind people kind maybe But to expect XXX-gig would not

last looks the of of number you kind flattish. over of kind -- if You look quarters, it

a sense market that stream. modestly you're see market. participants growing to for get as want Some what seeing of this your revenue I

it's expecting I flat. we're relatively large mean, not mean, Yes. drops. been I

in to our of of one process remarks, I noted, prepared their XXX-gig. supplier. in customers, is selected, customer from we've as a I And large very as mentioned been XXX-gig as XXX-gig our playing However, transition the

decline XXX-gig what the expect anticipation in much we expect to of we XXX-gig that's that will in meantime, So their business and somewhat pretty see.

again. Okay. Perfect. Thank That's me from you. all

Okay. Very good.

Thank we closing you. call further remarks. to will time, for turn this have And I At Dr. Lin questions. the Thompson over no

us joining for you thank Again, today.

Investor to to virtually want we thank we our look customers As employees for forward to seeing continued support, our to you always, will many upcoming and your Conference. and at extend investors, of you, to

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

You disconnect. may now