Applied Optoelectronics(AAOI) - 2024 Q1 - Earnings Call Transcript

Financial Data and Key Metrics - Revenue for Q1 2024 was $40.7 million, below the guidance range of$ 41 million to $46 million [8] - Non-GAAP gross margin was 18.9%, below the guidance range of 21% to 23%, primarily due to product mix [8] - Non-GAAP loss per share was$ 0.31, within the guidance range of a loss of $0.28 to$ 0.33 [8] - Total cash, cash equivalents, short-term investments, and restricted cash at the end of Q1 was $17.4 million, down from$ 55.1 million at the end of Q4 2023 [22] Business Line Data and Key Metrics - Data center product revenue was $29 million, up 42% year-over-year but down 35% sequentially [9] - CATV segment revenue was$ 8.7 million, down 59% year-over-year and 30% sequentially [9] - Telecom product revenue was $2.3 million, down 39% year-over-year and 19% sequentially [19] - 71% of Q1 revenue came from data center products, 22% from CATV, and 7% from FTTH telecom and other [13] Market Data and Key Metrics - Revenue from 100G products increased 33% year-over-year, while 400G product revenue more than doubled [9] - 73% of data center revenue in Q1 was from 100G products, 17% from 200G and 400G transceivers, and 3% from 40G transceivers [14] - The company shipped final qualification units of DOCSIS 4.0 amplifiers last week, with revenue expected to begin by the end of Q2 [18] Company Strategy and Industry Competition - The company is accelerating development of 800G and 1.6 terabit products to meet increased demand for AI infrastructure [11] - AOI is positioning itself as a leader in DOCSIS 4.0 technologies, with products designed for next-generation network deployments [24] - The company expects to achieve non-GAAP profitability in 2024, driven by improvements in the second half of the year [10] Management Commentary on Operating Environment and Future Outlook - Management remains optimistic about the second half of 2024, citing constructive customer interactions and strong long-term demand drivers [10] - The transition to DOCSIS 4.0 is expected to begin in Q3, with significant revenue ramp anticipated in the second half of the year [17] - The company expects improving gross margins throughout 2024 as product mix improves and CATV revenue ramps [20] Other Important Information - The company participated in the Needham Technology, Media, and Consumer Conference on May 16th [7] - AOI management will host its Q2 2024 earnings call on August 8, 2024 [7] Q&A Session Summary Question: Full-year revenue target of$ 300 million - Management believes the $300 million revenue target is still achievable despite a slow start to the year [28] Question: Operating expense expectations - R&D spending has increased due to accelerated product development timelines, with operating expenses expected to range between$ 24 million and $26 million per quarter [30] Question: Product roadmap and 400G revenue - The company is transitioning to higher-speed products, with 400G revenue representing 17% of data center revenue in Q1 [32][33] Question: Microsoft's order trends and 800G opportunities - Microsoft's 400G product adoption has been slower than expected, but the company expects orders to ramp in Q3 and Q4 [37] - The 800G market opportunity is several times larger than the 400G opportunity, with significant revenue potential from both existing and new customers [46] Question: Data center revenue ramp and CATV contribution - Data center revenue is slightly ahead of plan, while CATV revenue is ramping slower than expected but is expected to contribute meaningfully in the second half of the year [48] Question: 800G product qualification and production - The company is in detailed discussions with multiple customers for 800G products, with production expected to ramp in Q3 2024 [49][52] Question: 800G AOC development with Creta - The company has not provided specific details on production schedules for the 800G AOC developed with Creta [61]