Q4 2019 Earnings Call
Thank you.
I'm Lindsey salaries applied optoelectronics investor relations, and I am pleased to welcome you to a wise fourth-quarter and full-year 2019 Financial results conference call after the market closed today. So I issued a press release announcing its fourth-quarter and full-year 2019 Financial results and provided its Outlook page. The first quarter of 2020. The release is also available on the company's website at
This call is being recorded and webcast live a link to that recording can be found on the investor relations section of the website and will be archived for one year.
Joining us on today's call is dr. Thompson Lynn founder chairman and CEO. And dr. Stephen Murray KO as Chief Financial Officer and chief strategy officer Thompson will give an overview of Lies Q4 results and Stephen will provide Financial details and the Outlook to the first quarter of 2020 a question and answer session will follow our prepared remarks.
before we begin
I would like to remind you to review a wise Safe Harbor statements on today's call management will make forward-looking statements these forward-looking statements involve risks and uncertainties as well as assumptions and current expectations which could cause the company's actual results to differ materially from those anticipated in such forward-looking statements in some cases. You can identify forward-looking statements by terminology such as the lease anticipates estimates intends predicts expects plan page. May should could would will or thinks and by other similar Expressions that convey uncertainty of future events or outcomes.
Forward-looking statements also include statements regarding Management's beliefs and expectations related to the expansion of the reach of our products into new markets and customer response back to our Innovation as well as statements regarding the company's outlook for the first quarter of 2020 except as required by law. We assume no obligation to update forward-looking statements for any time after the date of this earnings call to conform these statements to our actual results or two changes in the company's expectations.
warranty
Information about other risks that may impact the company's business are set forth in the risk factors section of the company's reports on file with SEC including the company's annual report on form 10-K for the year ended December 31st, 2018.
Also with the exception of Revenue all financials discussed today are on a non-gaap basis unless specifically noted otherwise non-gaap Financial measures are not intended to be considered in isolation or as a substitute for results prepared in accordance with gaap a Reconciliation between our gaap and non-gaap measures as well as a discussion of why represent non-gaap Financial measures are included in our earnings press release that is available on our website before moving to the financial results. I'd like to announce that managing what present at the Raymond James Institutional Investor conference on March 3rd and will host an investor session at on Tuesday, March 10th at the San Diego Convention Center. This discussion will be webcast live and a link to the webcast will be available on the investor relations section of the website. We hope to have the opportunity to see many of you.
additionally I'd like
To note the date of our first quarter 2020 earnings call is currently scheduled for May 7th 2020 now I would like to turn the call over to dr. Thompson Lynn applied optoelectronics founder chairman and CEO Thompson.
Lindsay and thank you everyone for joining us today with to leave a revenue in line with our guidance range and chipped better-than-expected results on the bottom light on a Q4 revenue of 48.7 million dollars down Caicos margin of 37.6% and then loss of $0.18 per share the same quarter the data Centre demand environment remain consistent with our expectations.
Why are we are continuing to see improved all the patterns among two of our hyperscale? They are saying the customers we do remain cautiously optimistic as the man continued just to stabilize the amount our customers. We are freeze to be ported. We recently receive a design win for our for energy product with the tier-one equipment manufacturer and we are encouraged by the customer interest. We are seeing with this product.
You see a TV?
We'll see a TV team environment continue to be solved while we expect this condition to influence your performance in the near-term We Believe amen. We're position given our Innovative technology MSO move to next-generation architectures. We continue to make good progress in diversifying our customer pay off and doing the quarter with q or ninety nine wins with other night design wins coming from new customers.
With so do you want Total design win for the eve which is nearly 20% higher than our total design wins in 2018.
Would be it is that this is Marty of new customer design wins activity reflects February allowing large domain and may feature in execution.
Demonstrates the ongoing success of us to extend sales our coal hyperscale customer base.
before
Studying the call over the statement for additional details and how Outlook I would like to force address the coronavirus operates as a result or the copy nineteen up in China. We experienced Church in operation there if you what operation in limbo was shut down for approximately 2 and 1/2 Weeks our normal during holidays.
We are currently up and running again approximately 70% of our normal capacity.
Which is the Improvement status as our staff is able to return to work?
In order to reduce the impacts of the shutdown our customers we have taken measures to increase production and our Factory in Taiwan and in the US dead.
Hello, we anticipate reduced Revenue in some additional expense in q1. We are working hard to minimize this impacts. We have included our current price estimate of the impact in our guidance. However, I will cautious that they are still single vehicle our notes with respect to the extent and duration of the impacts to operation.
It is part.
That this issues will be temporary as a situation Channel groceries gets back to normal 7, we provide additional detail, but our wage at a town to sell stuff and leadership in China for their education in feeding with this reverie evolving situation.
And also go out to all those individuals in China and around the world who are suffering from this unit.
We encouraged by the technician. We are seeing with our Energy Products and a continuous size or recovery from several of artists and customers. They also happen to be priests without these that Waits we do we may focus on delivery Innovative technology to our customer and are well positioned to capitalize on objects. Go ahead of off the market improve. We are looking forward to search chances are technology solution and meeting with many of you at all next month.
Oh, it's Nicole over to Steven.
To leave you the details of our Q4 performers in order for 7.
Thank you Thompson.
RQ for financial performance and demand environment were broadly in line with our expectations.
Total revenue for the fourth quarter was 48.7 million dollars, which was at the high end of our guidance range.
Our data center Revenue came in at 39.3 compared with forty two point six million dollars in Q4 of last year.
In the fourth quarter 49% of our data center Revenue was from our 40G transceiver products and 42% was from our 100 G products.
Something mentioned we are pleased to report a design win for our 400g product with a tier one network equipment manufacturer, which we received subsequent to quarter-end wage pleased with the interest and customer engagement that this product is generating.
We remain inactive qualification with other customers for their 400g data center transceiver needs and look forward to additional design wins as these activities culminate over the next few quarters.
Data center market dynamics played out similarly to the last few quarters with a slight Improvement in Q4 compared to Q3.
We are continuing to see a modest recovery among two of our hyperscale data center customers while One customer continues to purchase product from us, but with reduced demand
Looking ahead. We remain cautiously optimistic about the demand picture in the near-term.
We had seven design wins in the quarter in our data center segment with four out of the seven wins coming from a new data center operator customer. We are very pleased with this new customer traction wage to begin generating revenue from this new relationship this quarter.
Turning to our cable television product segment.
Revenue from catv products was six point eight million dollars compared to twelve point seven million dollars in Q4 of last year primarily driven by we can demand from our North American MSO customers off.
We continue to believe that mso's are delaying upgrades pending. The availability of new technologies such as DOCSIS 4.0.
looking
Head we believe this environment will continue through the first half of this year driven by demand Dynamics. We discussed and coupled with typical seasonality while we believe these conditions will impact our near-term. We believe that remains well positioned as these new technologies rollout. Give it our key Technologies like remote fine.
Revenue from our Telecom products was two point two million dollars compared to 2.8 million dollars in Q4 of last year in line with our expectations primarily driven by a decrease in sales of certain products partially offset by increasing sales of newer products such as those designed for 5G Network deployments.
In addition to the seven design wins in the data center segment. We had one design wind and our Telecom segment during Q4. This design win is with a network equipment manufacturer of 5G networking equipment.
for the quarter 81% of our Revenue was from Datacenter products 14% from catv products with the remaining 5% from ftth Telecom and other
Fourth-quarter, we had to 10% or greater customers both in the data center Market that contributed 39% and 28% of total revenue respectively.
For the year, we had for 10% or greater customers three in the Datacenter segment that contributed 32% 24% and 11% respectively and one in the catv money. They contributed 10% of total revenue.
In total for the fourth quarter, we secured nine new design wins among six customers five of whom are new to buy bringing. Our total design wins in 2019, 2:31 a.m. Up from 26 design wins in 2018.
We made good progress this year and diversifying our Revenue base with a declining Revenue concentration the concentration of Revenue among our top 10 customers decreased from 92.9% in 2018 to 88.1% in 2019.
Thank you for our top 10 customers combined to account for 87.5% of our Revenue compared to 91.5% of our Revenue in Q4 last year.
Thank you for we generated a gross margin of 27.6% up from 24.7% in Q4 of last year and within our guidance range of 26.5% off 9% primarily driven by operational efficiencies and a favorable product mix.
Total operating expenses in the quarter were nineteen point four million dollars or 39.9% of Revenue compared with eighteen point seven million dollars or 31.8% of Revenue in the same quarter of last year.
We had zero point three million dollars in direct economic incentives from the Chinese government in Q4.
Operating loss and the fourth quarter was $6 compared to an operating loss of 4.2 million dollars in Q4 last year.
Gaap net loss for Q4 was thirty five point four million dollars or loss of $1.76 per basic share compared with gaap. Net loss of eight point six million dollars or $0.43 per basic share off in Q4 of last year.
the increase
Lost was primarily driven by a valuation allowance against certain of our deferred tax assets totaling 25.7 million dollars on a non-gaap basis net loss after tax for Q4 was three point six million dollars or loss of 18 cents per Basics here, which was favorable to our guidance range of a loss of four point three million dollars to 5.9 million dollars or Twenty $0.01 to Thirty cents per share and compares to a net loss of 0.5 million or loss of two cents per basic share in Q4 of last year.
The basic shares outstanding used for computing that lost in Q4 or 20.1 million.
Turning now to the balance sheet. We ended the fourth quarter with $67 million in total Cash Cash equivalents short-term Investments and restricted cash this Compares with 72.4 million dollars at the end of Q3. I'm going to flex 3.2 million dollars in cash used for operations.
As of December Thirty one, we had eighty-five million dollars in inventory compared to eighty two point 1 million dollars in Q3. The increase in inventory was mainly driven by inventory build-up ahead of the Lunar New Year. Although this was planned. We believe this extra inventory will be useful to us as we continue to recover normal operations following the coronavirus shut down longer-term. We continue to believe inventory levels will rationalize we made a total of 5.2 million dollars in capital investments in the quarter including 2.2 million dollars in production equipment and machinery and two point seven million dollars off of Construction and building improvements.
Capital expenditures in 2019 of 37.6 million dollars were below our expectations of $46 and the