Q2 2021 NeoPhotonics Corp Earnings Call
Please standby we're about to begin.
Good day, everyone and welcome to the meal Photonics second quarter 2021conference call. This call is being webcast live on the company's website at www.
Neil Photonics Dot com on the events page of the investors section.
This call is the property of neocon, it and any recording reproduction or transmission of this call without the express written consent of Neil Photonics is prohibited.
I'll now turn the call over to Erica Mannion at Sapphire Investor Relations. Please go ahead.
Good afternoon. Thank you for joining us discussing the O photonics operating results of the second quarter of 2021 and the outlook for the third quarter of 2021 on the call today of Tim Jenks, Chairman and CEO Wilkin, Penn Chief product Officer, and Beth Eby, Chief Financial Officer.
Tim will begin with a review of the company's business in the second quarter and the discussion of relevant market trends will kind of will provide a summary of products technologies and growth drivers for our highest speed products.
I will then provide financial results for the second quarter and provide the outlook for the third quarter of 2021 before opening the call for questions.
The company's press release and management statements. During this call will include discussions of certain not non-GAAP financial measures and information, including all income statement and balance sheet amounts and percentages other than revenue unless otherwise noted.
These non-GAAP financial measures are not prepared in accordance with GAAP and are not a substitute for or superior to measures of financial performance prepared in accordance with GAAP.
These financial measures and a reconciliation of GAAP GAAP to non-GAAP results are provided in the company's press release of related form 8-K being filed today with the SEC and can be found in the Investor Relations section of the Neo Photonics website.
The material can change on the webcast is the sole property and copyright of Neo photonics with all rights reserved certain statements in this conference call, which are not historical facts may be considered forward looking statements that involve risks and uncertainties and include statements regarding future business results product and technology development.
Customer demand inventory levels, economic and industry projections and subsequent events.
Various factors could cause actual results to differ materially. Some of these factors have been set forth in our press release dated August 3.2021 and are described at length on our annual and quarterly SEC filings.
Now I will turn the call over to CEO, Tim Jenks.
Thank you Erica and good afternoon.
Neil Photonics again delivered strong results from the second quarter with revenue of $65 million, both revenue and gross margin were in the upper end of our guidance range of products for 400 gig and above applications grew 100% over the same period last year and were 46% of total revenue.
We achieved these results despite ongoing supply chain challenges as we mentioned last quarter.
The strong demand, we're seeing for 400 gig and above solutions suggests that growth in 2022 could be higher than in past years, we believe accelerating demand for our 400 gig of the boat products is still in early innings.
As the market continues to move to these higher speeds. We believe we are entering a new era of growth.
Core coherent components for 400 gig and above applications have driven most of our 400 gig and above revenue to date.
We expect to see cloud hyper scaler on telecom carriers increase their capex spending and deployment rates for these products.
And our 400 gig coherent modules.
We've been sampling of our 400 gig coherent module solutions to cloud and Hyperscale data centers, we expect cloud data centers to begin deploying 400, ZR coherent links in the fourth quarter.
We believe we are at the beginning of a broad market expansion for 400, ZR and 400, ZR plus based networks and applications. This expansion has started with adoption of coherent interconnects into cloud service provider of Metro networks.
Rapid adoption of 400 G R and 400 ZR plus in cloud Metro applications will be followed by.
Like cloud content providers, Similarly, adopting 400 G R E.
And 400, ZR plus for longer distance interconnects significantly expanding our served markets.
The cloud and Hyperscale interconnect market is expected to soon rival the telecom market in high speed Internet.
Yeah.
AI enabled applications, such as autonomous vehicles, and machine learning will rapidly expand traffic and bandwidth requirements and the edge cloud market.
These are huge megatrends that we believe will expand the our applications and deliver accelerated growth with each overlapping cycle for at least several years are.
Our high speed component products for 400 gig 600 gig on the 800 gig are used by virtually all leading network equipment manufacturers in cloud and Hyperscale networks also our ultra narrow line width tunable lasers are the laser of choice for 400 gig and above.
That we are designed into several other customers 400 ZR modules. These products are beginning to ramp now.
Ahead of module deployments in late 2021 and 2022.
Our 400 ZR modules are on later qualification phases with leading Hyperscale.
Our target customers have wide ranging volume plans, we believe that our 400 G. R and 400, ZR plus modules are industry, leading and performance standard maturity and we expect the initial deployments towards the end of 'twenty 'twenty 1.
The industry's momentum of innovation and growth continues to move in our direction with ever higher performance requirements as.
As this occurs.
Our high speed and high performance optical components will increasingly be the differentiator and we believe that near photonics and capture a larger share of this value.
Before turning the call over to walk on yen.
I want to highlight additions to our executive team and board.
This past month, we appointed Bradford right as senior Vice President of Global Global sales.
Brad brings the neo photonics 25 years of experience in the optical communications and semiconductor industries.
Most recently he was the head of worldwide component sales and applications at Cisco systems. Following its acquisition of Acacia Communications, where Brad was vice president of sales.
We have added 2 new directors to our board Kimberly Cheney brings deep experience in legal and regulatory affairs and has a background in the aerospace and automotive industries share.
Sheri Savage brings a strong background in finance controls contract manufacturing and related business models the.
Savage is sort of serving as a member of our audit committee wellness trainee of serving as a member of our nominating governance Committee. We're delighted to have these high caliber directors on our board.
With that I'll turn the call over to walk on Yuen, our chief product Officer.
Thank you Tim and the good afternoon.
We have to talk about 3 key elements of our coherent product suite for the highest speed over distance applications.
First of all 400, the all plausible modules.
Second our extended reach for the ZR, plus modules and third of coherent components, including our industry, leading ultra pure light tunable lasers.
All forms of as you are plausible modules such as all of Q as the PDD all for use in data center interconnect applications with reaches of around 100 kilometers.
These modules comply with the optical into of networking forums implementation of agreements and have been successfully tested at the multiple hyperscale data center customers, demonstrating interoperability with other leading vendors for them because of the all modules.
All forms of the R. <unk> D day modules utilize our vertical the integrated silicon photonics coherent optical sub assembly or closer.
And our low power consumption ultra narrow line width narrow <unk> tunable laser.
And it can be operated over the temperatures ranging up to 80 degrees Celsius.
On the extended temperature of data center environments that reduce coding requirements.
Okay.
Oh of phone does the on modules have completed to the courtyard liability qualification and have passed 2000 hours of heightened butcher operating life.
Paul tests.
All forms of ZR modules on now in general availability and on.
Shipping to customers, while continuing our later stage qualification work either hyperscale.
Our extended reach 400, plus <unk> plus of our modules so of metro distances.
All of our ultra pure light tunable lasers and high performance coherent components, coupled with the latest 7 nanometer generation Dsp's increase the reach of our <unk> modules far beyond the decided distances to metro reaches expanding our served market.
We successfully demonstrated our forms of the <unk> plus <unk> coherent plausible modules Trust meeting 400, Gigabits per second over a distance of 800 kilometers being a 75 because of the space USA amplified qdoba the system, enabling a record with total of 5 book of <unk>.
The 4 IP over <unk> of a D N a CUSIP PDD module.
Well, even more central applications, we now integrate all indium phosphide coherent modulator and receiver with on nano tunable laser into CFP 2 do you see your modules.
The match performance of embedded or <unk>.
The assay based the systems operating at 400 gig.
The fraction of the size and power consumption.
We have demonstrated our multi rates of cfe to D. C. O cadre of plausible module Trust meeting at a 400 gigabit per second instead of rate over a distance of fishing hundred kilometers being a 75 gigahertz space either with the channel plan using only standard ETF of amplifiers and without cost.
The realm of amplification.
We believe this is the industries longest demonstrated the transmission distance for CFP <unk> module.
Enables all of covering all metro roads on applications and providing an upgrade path to 400 gigabit per second operations for Metro Road and networks with the pay as you grow the flexibility.
Each of these new important new products demonstrate our leadership in high speed over distance performance.
Moreover, each of these new products is adding a new growth revenue stream on top of the accelerated growth. We are already delivering for our high speed 64, gigabyte and 96 gigabyte suites of coherent components.
We all the times like the 1 we.
We see great potential for these 400 ZR plus plausible modules could include cloud Metro regional and long haul applications.
Lastly, the foundation of all of our coherent products is our coherent components.
Putting our industry, leading ultra pure light tunable lasers for high speed chassis based systems operating out of 400 gig to 800 gig and 4 hour plausible modules.
Showing our continued scale and leadership in components, we recently announced that we have shipped a cumulative total of more than 2 million of our ultra narrow line width tunable lasers since initiating the shipments in 2011.
So the chassis space also high performance systems, all the tunable laser receiver and modulate the products have broad market acceptance due to their performance quality reliability and availability.
We continue to serve the highest speeds and are now shipping 96 gigabyte versions for 800 gig systems.
And are developing a 130 gigabyte versions for 1 terabits per second and beyond.
In the another industry first we recently demonstrated the required the optical performance for 8 hundreds the R 800, the App plus Dci and Metro optical networks.
Which has made it the 100 gigabit per second over a distance of 600 kilometers with only the USA amplification again, not requiring realm of amplification.
This demonstration of use our class 70, coherent driver modulator, CDN and coherent receiver micro ICR, along with our ultra narrow line width tunable laser.
These components point of the way to 800 gig plausible solutions, while when paired with mixing duration 5 nanometer DSP.
Our core capabilities in coherent optics technology are now gaining traction in new market applications, including interest at the light communication links for low Earth orbit Leo satellites.
And for industrial and transportation applications of Lidar.
Local here of the Lidar, we have multiple engagements with our high performance optical solutions and the applications, including autonomous vehicle navigation.
These include both key components to the rights from our communications part of the lives for certain systems as well of us more integrated chip scale light of solutions.
With that I will turn the call over to our CFO Beth Eby.
Thank you Ruben and good afternoon.
The of Photonics contingent continued to execute well through the second quarter increased demand for our high speed products resulted in better than expected revenue and gross margin.
As Tim mentioned revenue was $65 million on strong demand for our lasers, and 400 gig and above products.
In the quarter, we had 310% customers.
As we said last quarter, we restarted shipments to Huawei in Q1 for a limited set of products and we expect that their quarterly revenue to be in the mid to high single digit millions on a run rate basis Q2 was somewhat higher at 14 million given the lack of shipments in previous quarters.
We do not expect Huawei to be of 10% customer for the year.
Non-GAAP gross margin of 21, 7% was above our range as a result of favorable product mix and the shift of approximately $1.5 million from cost of sales to R&D expense from materials related to the new product introduction.
The shift is an accounting timing issue.
Product margin of 37, 6% was offset by the expected levels of excess capacity charges.
Yeah.
We expect these underutilization charges to drop as we ramp volume and complete the consolidation of our indium phosphide production as we announced last year.
Non-GAAP operating expense for the second quarter was $24.4 million higher than expected due to the cost of sales to R&D shift I previously mentioned.
Non-GAAP operating loss for the quarter was $10.3 million due primarily to excess capacity charges.
Ex loss was $1.1 million or an impact of 2 cents a share.
Tax expense allocated to Q2 was <unk> 2 million lower than last quarter on lower profit in our foreign jurisdictions.
This resulted in a non-GAAP net loss of $11.4 million and a loss per share of 22.
This is <unk> <unk> better than the midpoint of our estimate as a result of the higher revenue.
I will close out my discussion of the second quarter income statement with the review of our GAAP results.
Second quarter gross margin was 15, 2% down from 21, 8% in Q1, mostly on a $3.3 million inventory write down of a product that we were shipping to Huawei.
This charge was taken due to uncertainty that we could ensure continued compliance throughout the supply chain for this product.
Operating expense was $26.2 million up $1.8 million from Q1, mostly on the materials charged to R&D expense.
Operating loss for the second quarter was $16.3 million and net loss of $17.4 million, which included the inventory write down stock based compensation of $2.3 million and point of 4 million of amortization accelerated depreciation and other costs.
Turning to the balance sheet, we finished the quarter with $95 million in cash investments and restricted cash down $16 million from Q1 on new product startup cost the payment of 2020 variable compensation and the pay down of debt.
Net inventory was $44 million down 2 million on the product E O L days.
Days of inventory improved to 72 days, even as we continue to buffer critical inventory and support the new product ramps.
Looking to Q3, we are seeing the expected increasing demand for our leading 400 gig capable components, particularly our lasers and the increase in demand for our modules.
However, we have a new chip shortage due to a supplier timing decommit that has an $8 million adverse impact on revenue in Q3.
We have mitigation actions and progress and have widened our range to allow for the possible outcomes.
Meaning we have confirmed supply and inventory to meet the low end of the range we.
We have confidence in the actions to reach the mid point.
And our working mitigation actions that could allow us to reach the high end of the range.
While we have sufficient demand to achieve non-GAAP breakeven in Q3, the supply chain limitations are extending the timing to reach operating profit to Q4.
Yes.
As a result, the company's expectations for the September 2021 quarter our Rev.
Revenue in the range of 76 million to $84 million GAAP.
GAAP gross margin in the range of 24% to 29%.
Non-GAAP gross margin in the range of 25% to 30%.
GAAP diluted earnings per share in the range of a 20 cent loss 2 of Tencent boss.
And non-GAAP diluted earnings per share in the range of 8 tenths of boss to breakeven.
These numbers are reflective of approximately $52.5 million basic shares.
Looking forward to the rest of the year, we expect to grow revenue at an accelerated rate approaching the levels of 1 year ago, and consistent with our growth target of 25% to 35% excluding Huawei.
This reflects the continued high demand for 400 gig and above capable products.
Over the longer term market size estimates for 400, ZR and 400, ZR plus plug a hole modules continue to increase.
As we gain confidence in the strength and size of our module ramp we may review of our capital structure to ensure that we maintain the flexibility to be able to support customer forecasted ramps.
Last year, we lost significant revenue following tightened pis restrictions on Huawei.
In parallel we accelerated our pivot to cloud focused customers.
As we embarked on this new path, we said the number of 400 gig and above coherent ports being shipped each year is approximately doubling.
We would have new 400, ZR module products that would ramp in 2021.
And we expect it to get back to non-GAAP operating profit in Q3.
Even with the supply chain issues, we are on track to those calls for the second half.
400 gig and above capable revenue grew 100 per cent year over year in Q2.
And we expect total year over year growth to be 100% or higher.
We are in later stage qualification with target Hyperscale customers for 400 ZR.
And we expect to achieve non-GAAP operating profit breakeven now in Q4.
We are pleased with our company performance over the last year and are excited about our path forward and.
And our additional growth vectors in the Hyperscale market.
With that the operator will now open up the line for questions.
Index.
Thank you if you would like to ask a question. Please signal by pressing star 1 on your telephone keypad. If you are using a speaker phone. Please make sure. Your mute function is turned off to allow your signal to reach our equipment. We do ask to please limit your questions to 1 question and 1 follow up once.
Again that is star 1 if you would like to ask a question we will take our first caller.
As Paul Silverstein from Cowen and co.
I've got a volatile of late.
Good day Paul.
Good afternoon, I've got a handful of related questions starting with <unk>.
I just wanted circling back to the did the math right for Q3 of your non Huawei business youre expecting to be up around 40% year over year is that accurate.
Starting on the map for Q3 of 3 sounds a little high but not well understood.
The Huawei was 14 million of Q2, and you're expecting at the mid mid to high single digits in Q3 right.
The 80 million.
And on that you're out of rail.
<unk> million dollars of residue.
Suggest whereabouts.
72, alright part of.
Sure Doug.
That's about right alright.
Alright, I'm looking at the numbers for the Labrador Yep.
The next question.
Given the risk of the tendering Huawei can you give us any insight on under some sensitivities here, but can you give us any insight.
What are you shipping to Huawei from what used cases, and where's the confidence that 2 or 3 quarters from now that revenue is not going to go back to zero.
As we said a year ago, we're not going to rely on or depend on Huawei.
And we will operate the company accordingly.
If the if they're on a very small number of products.
And Oh, they're not of 10% customer that's the level of risk that we will we.
We will have.
But.
We don't know what the future.
The bears there so essentially.
Uh huh.
It's it is several million dollars on a quarter, but it's a relatively small per cent.
And Tim the.
Components, you're shipping to Huawei do you have visibility going into this but your optical build outs.
Oh, we don't we don't expect that they are now.
Alright, My last question RPG raised some concerns about the China market because this warning of general.
Any of them. So you can share what youre seeing and sort of what your expectations are for the back half of the year beyond.
You know in the China market. There has been you know some.
Reports of additional tenders primarily the.
Related to 5 G. So it has it has a limited impact on on our business Theres also some views that there could be share shifts between the network equipment companies in China, Although in our case, we're selling to all of them.
And so you know the specifics of IPG I couldnt comment on but.
So for us it's a it's a.
Smaller.
The dependence for our overall direction on our overall business.
Thank you, Sir moving on to Tim <unk> of Northland capital markets.
Hey, Tim.
Good afternoon.
A lot of the numbers flying around there.
Hum It all sounds all sounds pretty good so I think it's good.
Anyway, let's start with the comment you made on the call about.
The accelerating rate of growth relative to past years.
In calendar 'twenty 2.
You said on and.
Obviously, we have a challenge here with comparability.
When we talk about past years. So are you talking about 400 gig in particular.
There or can you give us some more color on that comment.
So the the there are 2 things I'd comment on.
In our prepared remarks, we said that.
Our growth is.
Heavily dependent on the growth in 400 gig.
And we see that the 400 gig and above growth.
<unk> has different pieces. The 406 hundred 800 is driving components for embedded or chassis based systems and 400 gig coherent modules going into the data center is.
It's really 2 potential revenue streams from 400 gig and 400 gig.
Gig ZR plus.
And so.
We see these all as a.
Potential positive and in terms of additional revenue streams for our company.
We think these are important and in contrast to.
You know the last several years. This is the this is of a position where we think that we're well positioned and we have the potential to take a larger share of.
The business and the value from this.
I hope that answers your question.
Yeah.
Was there anything further sir.
Sorry, I was on mute there.
Oh.
No no Tim that does not answer my question.
So, let's let's try it across 2 different <unk>.
Taxes here, 1 I think.
Is it 25% to 35% ex Huawei growth that you reiterated something along those lines do you expect that to accelerate or you talked about 100% growth plus the 400 gig.
Either 1 of those true.
Try and tell you down in terms of the acceleration what youre referring to there.
Yeah, so so year to date or ex Huawei growth is about 15% and based on the questions that are the prior analyst asked if you. If you took those numbers are ex Huawei growth for Q1 to Q3 would would move into the 25.
On the 35 per cent range, and we think that would continue.
True.
The year so.
It is the case that our 400 gig and above revenue in the second quarter was 46% of our total revenue.
And it grew 100% over the prior year, so on our overall growth rate.
Is not as high on obviously as our 400 gig and above growth rate, but these are the parts of our growth equation that matter of the component growth. The 400 ZR module growth the <unk>.
400, ZR plus module growth and then the laser growth into other customers 400 ZR modules.
Thank you Sir moving on we'll take our next question from Fahad and of John of M. K M Partners LLC. Please go ahead.
Thank you.
Hi.
Can you just help us.
You released that information of the.
Thank you, but can you give us the other 3 per cent customers that you are the debt.
That puts the customer that you have what the revenue contribution.
Oh no. We just described that we have we have 310% customers.
As required yeah, we don't we don't name them on the except in the K when required.
Required okay.
Okay what was the.
The 2 and 3 or was it all with the revenue.
Part of it.
Yes.
So we've got in our AR and our usual filings weird, who you will be saying that the top 5 customers are 77 per cent.
Oh, okay.
Alright.
If I heard you correctly, you said that you had an $8 million of component headwinds.
The Q3 guide so all else being equal at the midpoint of your guidance would have been $88 million or Q3, if it wasn't for the component shortages.
Did that did you.
Yes.
Yes, you heard me correctly, it's the demand is not our problem at the moment.
Thank you Mr. John next we'll hear from Alex Henderson of Needham.
Thank you.
So.
I guess the primary question really is the timing of when the 400 gig product does it.
The start to ramp.
On the ZR format.
Have you actually started any production of it at this point.
When do you think you might actually be producing at.
Getting to the.
Material production rate of say 1000 units a month of which I think is just the level of <unk> stated in prior periods.
What would be considered the production volumes.
Is that kind of happen in the <unk> or is that going to happen in the <unk> any sense of timing.
And similarly, you've talked about qualification, but have you actually got orders for these 3.
The new products in hand at this point.
Well, let's see that was a lot of questions Alex.
Let's say you know it is the key question on on what is the timing of the production volumes.
We are we are producing the the the product is in production, we have announced general availability for 400 ZR modules.
The current production rates are are light relative to our capacity we think that.
Actual deployment levels could begin in the.
Q4.
And.
What we see right now as I said in my prepared remarks as you know we're also designing the several other companies' products and so.
People are.
Who are using our lasers are for their supply chains are.
Ordering lasers for.
For delivery because they expect similarly to be shipping some modules in Q4.
Youre not willing to say that you actually have meaningful orders for the 400 gig ZR at this point.
I'm I'm willing to say if I do we don't have large production orders because people aren't deploying yet.
Alex do we lose the are you still there.
Yes.
Thank you Mr. Henderson from moving on to Michael Genovese of West Park capital.
Great. Thanks.
2 questions number 1 can you just talk about what you're seeing in China in terms of the 5 G. Metro long haul demand has anything improved in the last quarter and what do you think about the back half of the year.
So for 5 G demand.
Our exposure in 5 G demand is principally.
A component level.
And where we're seeing some additional business because of the.
China Telecom tenders, but.
For 5 G as.
As we sell components into that market as opposed to.
You know higher ASP products.
It's fairly modest so you know metro and long haul.
Deployments, where we are more heavily represented those are still a bit muted.
Okay.
So.
No just the visibility there or updated expectations of when it might get better.
Yeah I I.
I actually cant answer that Mike I don't know we are.
We pay close attention with with customers, but it's it's a.
Uh huh.
Not as significant.
To us and it and it has been relatively muted and we can't tell you precisely when that turns around.
Okay fair enough Okay. The second question.
Just the I guess I just want to hear more color on what you're saying about the hyperscale of 400 ZR opportunity with Hyperscale you expect.
The meaningful.
Hyperscale deployments of 400, ZR and is the gating factor the their qualifications and their timing or of the gating factor is supply and just remind us what you said about the timing of the whole project.
So.
The the the gating factor is of their qualification and their deployment.
You have to have both and as.
As we said a couple of times in the the script we're in the later qual.
Qualification phases, where the couple of different customers, but you know it ain't over until it's over right. So.
We're not going to say that are you.
No we were putting it in the forecast or anything at particular numbers on until each of those wickets or of suitably passed and we do have our expectations on on timing, we do have our expectations on on.
Our preparedness, because we have put production capacities in place we have gone to general availability. We've we've we've put our supply chain in place and are but we do have to have the final qualifications and the production and deployment orders.
And.
You're right in saying that in the script well, we didn't say that that's correct.
Okay, alright, thanks, a lot of hope Michele.
Sure.
Thank you Mr. Genovese moving on to Simon Leopold with Raymond James.
Thanks for taking the question.
I wanted to just get a better understanding of the Huawei business in the June quarter specifically.
Or is this something that you had anticipated when you offered the forecast for June.
If not on just imagining that Huawei was better and therefore something else was worse in the June results. So just want to make sure I understand what you were initially assuming and what the Delta was.
Oh the assignment I think we said it straight out is we're expecting mid to high single digit millions.
And we got 14.
Not frankly of shock because they were they were.
Light or to nonexistent in the in the prior quarters.
So.
If we took 5 out of that 14 to make it of 9 you would've been at 60 male even the low end of your guidance. So I guess, what's the.
Trying to get out with the or something that was a little weaker in the quarter, maybe maybe let me just ask it that way.
Well the the I would answer that by saying you know when we guided to the second quarter, we saw softness.
And that is as it played out.
Okay, and I wanted to see if maybe you could unpack the.
The ZR opportunity, a little bit and maybe not specific quantification, but.
I think of you as having 2 dimensions of sales opportunities from the art products, 1 selling lasers to other module manufacturers and the other is selling your own ZR modules.
How should we think about the general trend for you as a component supplier versus to 2 other manufacturers as opposed to selling modules to end users.
Well lets see I you know I think in the beginning of <unk> prepared remarks, he talked about actually 3 parts of it.
They're they're ZR modules in their ZR plus module. So ZR modules for example would be OIS standard.
Module ZR plus are for longer reaches.
The cloud metro and and longer reaches and then the third piece would be.
The lasers into other modules and so.
The 1 that turns on the earliest as is the lasers because other people are anticipating supply chain needs.
And then the.
The how we see ZR and ZR plus.
The turn on if you will those depend on on customer timing and customer.
Products. So we have.
We have qualification work going on for both what we would call our 400 ZR standard products.
And.
As the <unk>, ZR and ZR, plus and you know I would say that between the 2 you know modules and components you know the.
You know the the opportunity over the next year or so there they are probably pretty balanced between those 2.
Thank you Mr. Leopold net.
Next we'll take a follow up question from Paul Silverstein of Cowen <unk> Company.
And of course, I'll actually take it offline I appreciate it.
Thanks, Paul.
And once again as a reminder, if you would like to ask a question or oppose the comment you may do so by pressing star 1 once again that of Star..1 if you would like to ask a question and next we'll hear from Tim <unk> of Northland capital markets with a follow up.
Well, it's going to surrender.
But I'm going to try 1 more time.
Mr of another comment on it.
Pardon me.
Go ahead Tim.
Thanks.
And this is another comment at least I think I remember hearing which is getting business back to previous levels and I think you are.
Talking to you about before Huawei went away. So are you guiding to 100 million dollar plus Q4 here.
Effectively I think you are.
You're guiding to somewhere somewhere in that range and we've held our 25% to 35% growth for the year or so.
We're getting there.
Okay.
I made it fantastic congratulate and the yeah in the in the third quarter you know the third quarter of last year, we were $102 million and we lost about.
$44 million as a result of that so essentially we have of lower breakeven point right now as Beth talked about but we're also.
Seeing demand.
That would allow us to approach those levels. So yes.
Got it great and 1 last 1 I promise.
As you look towards the end of the year, how material the ZR module and I'm talking about just modules now not components.
Would you expect that to be.
Guessing that could be could that be 10 per cent of revenue from Q4, as we exit the year.
And just as in the side might that be cloud guys, but also spread across carriers as well.
And that's it from me.
The.
In response to the per.
Prior questions.
You know those revenue streams.
Haven't turned on in the major way at this point in time and.
Yes.
We have seen the deployment schedule shift to the right as you well know.
And the timing for Q4.
Hey.
At the.
As as time passes it's it's possible that that 10% becomes a.
A bigger stretch goal of depending on when people actually started buying and in what quantity but.
Certainly.
Uh huh.
It's in our capability to produce at that level.
We obviously have to have the orders and shipments, but it is it's certainly possible for us.
Yeah.
And thank you Sir there are no further questions at this time, Mr. James will turn the conference back over to you.
Alright, thank you for to everyone for dialing in and we thank you very much for your interest in near Photonics.
We do appreciate the the diligent work of our employers.
And our suppliers really to drive progress in the current environment. We look forward to updating you in the future and meeting with shareholders again soon.
Have a good evening. Thank you.
And that does conclude today's conference. We do thank you for your participation you may now disconnect.
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Yeah.
Yes.
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