Q4 2021 POET Technologies Inc Earnings Call
Good morning, everyone and welcome to poet technologies financial and business update conference call. As a reminder, this conference call is being recorded and now like to turn the conference over to Brett Perry Investor Relations for Port poet Technologies. Please go ahead.
Thank you operator, and welcome to everyone participating on today's conference call over the phone and via webcast I'm, Brett Perry Vice President of Shelton Group, probably technologies investor relation firm joining us on today's call are stretched thin contestant poets, chairman and CEO Vivek rushing here, President and general manager of poet technologies.
And Thomas Mike <unk>, Executive Vice President and Chief Financial Officer as previously.
As we mentioned today's call is being recorded for replay purposes, a link to the webcast replay can be found in the Investor Relations section of poets website at Www Dot poet Dash technology stock Com. We've also posted a series of supporting slides on the IR section of the website. However to avoid any confusion I want to emphasize that managements.
Paired remarks are independent of the supporting material and therefore, the remarks on todays call are not directly tied to specific pages or the order of content and the supporting slide deck.
Additionally for those joining the call over the phone we will we will conduct a Q&A session. Following managements prepared remarks.
Which time, the operator will provide further instructions.
Before turning the call over to management I'd like to remind listeners to review the safe Harbor statements included and poet technologies recent press releases and regulatory filings on today's conference call management's prepared remarks will include forward looking statements and we may make additional forward looking statements in response to questions. These forward looking statements involve risks and uncertainties.
Well its assumptions and expectations as of today April 27, 2022, the company's actual results may differ materially from those anticipated in any such forward looking statements, which can be identified by terminology such as may well should expects plans anticipates believes our estimates and other similar expression.
The company assumes no obligation to update or revise forward looking information or statements, except as required by law more information about other risks that could cause.
They could impact poets future business and results are set forth in the risk factors section of the Companys filings with SEDAR and the SEC.
And finally, all financial numbers referenced on today's call will be in U S dollars unless otherwise stated it is now my pleasure to turn the call over to Dr. Suresh Van contestant for his opening remarks <unk>. Please go ahead.
Thank you Brett.
Good morning, and welcome to all of those participating on today's conference call.
We appreciate you joining us and for your interest and support.
Our company has been trading on the NASDAQ for about six weeks now and we expect that some of you participating in today's call are relatively new to pull that story. So I would like to take a few minutes to review the company's history and our current business strategy.
Although we've been public for 15 years as the company CEO since the middle of 2016.
I think a part of the startup.
Coming from a long career in the semiconductor industry.
Which has introduced many new technologies to the market for the first time.
I looked carefully at the technology that the company had at that time.
And determined that we needed a new direction.
But I honestly believed based on my experience and the requirements of the market.
The core mission of the company around integrated Photonics was correct.
The combination of devices into smaller more integrated design really has been the basis of a dense.
In semiconductor technology for the past couple of years.
With stunning amounts of innovation, bringing countless services and capabilities to our modern life.
With the emergence of cloud data centers, providing information and entertainment to our T V.
Phones and smart devices.
The demand for more data at lower cost has driven growth and innovation.
Across many aspects of data communications technology and services.
But one area that has lagged well behind others is the way that photonics sub assembly, what we call engines.
Book.
They've got limited integration.
And come with a very high cost of both capital and labor.
So we identified that as a problem that needed a new solution.
Okay.
However to succeed in this space with large companies spending billions on technology development.
A new startup such as ours must create a truly disruptive product that will compete.
Bob just with what others are producing today.
With products grounded in technology that will continue to be competitive far into the future.
I've always said.
Al.
Competitive differentiation is good sustained competitive differentiation is the key and that's what we're after here and it pull it.
So in 2018, we adopted the strategy of hybrid photonics integration.
Separately following today.
Based on our invention of the silicon based pull it optical inter pools.
Which is a completely new and innovative ways to combine electronic and photonic devices.
Into a single chip scale package produced entirely at wafer scale with standard semiconductor capital equipment.
After two years of platform technology development, we transitioned to product development in 2020.
And we have just in the past few months delivered first fully functional samples of our optical engines to customers.
In the Photonics World. This is an extremely short time to develop products. The gestation period is usually three years or more.
We validated that the platform first of 100 gig.
Proof of concept.
With a systematic development paths to extend the capabilities to higher speeds and higher data rates.
Yeah.
I am pleased to say that the products that we delivered.
And recently demonstrated live at the optical fiber conference made a strong positive impression.
On several of the largest and most well known companies in.
In the data communications and telecommunications industry.
This year's OFC was really our first opportunity to get face to face with customers, where they have a chance to physically face to face see our optical engines in operation we have not have this chance before.
Due to Covid and all of the other restrictions.
So it was extremely gratifying.
To see the response, we got to get the visceral reaction from our customers on what it is that we have accomplished.
On a personal level. It was extremely gratifying for me to see the reaction many industry leaders.
Pat you had positive things to say about what we have accomplished in terms of size scope and performance.
I now believe that in the Datacom telecom space.
You have a technology platform that has the potential to gain a significant share of the market for optical engines.
At 400, 800 gig nodes, while opportunistically, serving the 100 gig 200 gig markets as well.
And because of the size and level of integration that others had not even conceived of matching.
The subsequently take these nodes.
And deliver a plausible optical solutions for one six terabits per second 3.2, and even six four terabits per second in a single chip scale form factor.
The simplicity of the architecture of the optical inter pools there.
The bandwidth density and the energy efficiency.
The flexibility of the design for different formats, and applications and the ease with which module makers network equipment suppliers and data center operators can utilize the optical inter poles or <unk>.
All point to an opportunity for it.
To become a de facto integration standard in the photonics industry.
Opportunities for the company in the data communications and telecommunications market are large, but they are outstripped by the potential size and growth in other areas in which the fundamental features of the optical inter poles that can be applied five D networks AI accelerator, another photonics computing and computing chips communicate.
In computing chips automotive Lidar wearables.
These are all areas that we believe represent fertile ground for product based on our technology.
But we have to walk before we can run so let's review where the company currently has on our product development roadmap.
At our annual General meeting in October last year, and then later investor deck posted on our website.
We outlined a roadmap in which our initial products 100 gig WDM four LR four and 200 gig fr four would be moving from alpha to beta during the first half of this year.
I am pleased to say that despite intermittent shutdowns related to COVID-19, and both our Singapore and Lars engine labs, those milestones are intact.
We delivered our final they'll all four designs to our leading customer and.
And expect to be shipping beta samples so other customers of me.
It was exciting to see our leading LR four customer announced future availability of their travel bans on our solution at the OFC.
It speaks to increasing levels of confidence in the technology and our ability to execute the roadmap.
Okay.
A critical and physical next step in our product roadmap is 400 gig as it is the speed that is ramping up today in data centers and it is a basic building block of future 800 gig architectures.
We have executed flawlessly on the 400 gig Rx engine.
One of the few companies that demonstrated hybrid silicon photonics based integrated receive solutions at 400 gig at the OFC.
We will also be developing this year a version of the 400 gig receive engine with an integrated hybrid trans impedance amplifier, which will also mark our first product will flip its full optics electronics hybrid integration.
The 400 gig transmit solution has been a challenge.
However, given third party delays in the delivery of key components, particularly the modulator.
Nevertheless, we are actively working to mitigate this risk by pursuing alternate modulator sources in North America and Europe .
Even designing our platform to be external map modulator free.
Through the inclusion of advanced high speed lasers that are being introduced to the market now.
Delivering 400 gig fr four transmit and receive optical engine in both Alpha and beta versions are key milestones for the company.
It will be important entry points for <unk> in this large and growing segment of the transceiver market.
The real long term payoff isn't the way we can scale the speed of these devices because of the small size of the enterprise a platform. We're the only company today that can place to complete 400 gig at far for optical engine into a single <unk> module.
For a two by 400 gig or an equivalent of an 800 gig market.
Beyond that we can architect for 400 gig engines into our one six terabits per second module or tripling in fact, we already have designed for up to six four terabits per second.
A staggering 20 gigabit per second per square millimeter of real estate.
This is almost <unk> the bandwidth density of alternate solutions, we've seen.
Yeah.
Beta versions of our light bar products should also be available in the second half of this year as planned.
These are potentially large volume products as both module makers and network equipment operators use remote light sources.
That allow for thermal management and ease of laser replacement.
We're applying the light designs of our light bar in our products go into celestial AI, a designer of AI accelerator chips and others.
The addressable market that the market research firm <unk> project.
At larger than $70 billion in 2025.
When this market takes off and it's well it's really a question of when.
The volumes in this market are greater than 10 X larger than the highest datacom volume. So we see it today.
Clearly servicing such volumes required wafer scale engine Assembly.
Exactly what pull it does there is no way such a market can be served using conventional integration techniques that are being used in the market today.
What also makes this market so interesting for us is that for each of these ships, whether their accelerator chips or communication chips or optical computing chips.
They all need their own light source, it's a one to one attach rate and it smells spells a tremendous opportunity for it.
In summary.
Based on what we observe at the OFC, we believe that there are significant and sustainable advantages of our hybrid silicon photonic solutions in terms of size complexity and energy efficiency relative to the alternatives.
We believe that the entire industry needs and is looking for a means to combine best in breed component onto.
Onto a small flexible easy to understand easy to use energy efficient platform.
Built in features like multiplexing on other component integration.
Including scalability for generations of devices.
We believe we already have that platform, we call it deployed optical inter poser.
As a further testament to the increasing awareness and traction of our solution.
<unk> been invited to make presentations at the <unk> conference in Brussels in June .
At the <unk> conference in Basel in September .
Our paper entitled a wafer scale hybrid integration platform for co packaged photonics using a Cmos based optical inter poles or what all was also accepted for publication of the VLSI technology Symposium.
Which is a peer referred Premier conference for Cmos technologies in the World.
And our confidence with historically low acceptance rate.
I'll turn it over to Vivek, what's president and general manager to describe why we believe that OFC will such a milestone event for Poland.
Yeah.
Thanks Suraj.
Good morning, good afternoon.
I would like to add some color to what we experienced at OFC and to review in general our interactions with customers as we pursue our new product introductions.
Both in standard products.
Custom development for certain customers.
Product introductions are all about building momentum.
This is especially true with the new technology that customers do not yet fully understand.
Boyd's momentum began with our appearance at the virtual OFC in June 2021.
When we showed a live demonstration of two hour of our optical engines.
This was followed up in September of 2021 with demonstrations of six different variations of our optical engines.
Nick talk given by Doctored mall at the CIO.
Our China International Electro optics conference in September .
Most recently, we appeared at the optical fiber conference in San Diego in mid March showing tool function fully functional products and the 200 G and 400 G space.
They were very different in size and capability than any other products being shown.
Has some visitors to our booth came back several times they began to understand what they were seeing.
A truly revenue schnebly approach to device integration in photonics.
Boyd's challenge is to convince the industry that there is a different way to build photonic devices.
Then the way it has been doing for a few decades.
Whether invested in conventional assembly with its high capital cost and labor cost audited photonic integration using silicon photonics and with some companies have invested tens and hundreds of millions of dollars.
Asking customers to step back and view the problem from a different angle often takes a person of exceptional credibility and experience.
That's why we are pleased to be joined recently by Roger <unk>, Our new Vice President of product line management.
I have worked with Roger and previous companies and I believe he brings to Boyd experienced with deploying innovative components and network equipment and rapidly expanding markets.
I believe that as he built the team out of Allentown office to service customers globally. He will prove to be a great addition to ports management team complained complementing our leadership and other locations.
Aspiration mentioned last month's OFC event in San Diego was a watershed moment in the history of boy it.
With several key players in the industry, becoming aware of voice products and solutions and seen our optical engines in action for the first time.
We conducted live demonstrations of <unk> 200, GFR for transmit and a 400 GFR receive engines.
As far as far as a multiplex standard meaning that we can mix the signals of four independent laser generated frequencies into one channel and transmit the mixed signal a longest single fiber to quadruple the speed of the data transmission.
When a multiplex signal comes into and receive side of the module on a second fiber. It is filtered are deemed multiplexed on the optical into bowser into the original four frequencies.
Compared to other 400 G transceiver, Sean at the OFC, which were predominantly built to Dr. Full standards that require eight fibers module compared to our two.
There is a cost difference in the fiber need it but more importantly, using only two fibers is a vein four data centers to utilize the existing fiber investment more efficiently.
Boy does the only supply a fully integrated mops and demos built into the optical inter poles access.
<unk> lowers the cost and increases the energy efficiency of the device.
Two key competitive advantages for Boyd optical engines.
History has shown that when a multiplex version at the particular speed is available the market usually gravitates to it because of these cost efficiency factors.
Meta formerly known as Facebook recently began deploying 200 GFR for modules in their data centers.
Tencent in China is also deploying 200 GFR for and Google is deploying two by 200 GFR four followed by two by 400 GFR for as an upgrade path.
The market for 200, GFR four is projected to be several million units over the next two to three years.
Also because of our small size roughly 50 millimeter square of Silicon, we are able to easily to fit to our five to 100 G optical engines as well as two of our 400 Geos fr for optical engines in the compact <unk> double density module.
In the weeks following the West C. We have been following up with potential customers and strategic partners in the U S, including face to face visits separately currencies are welcome departure from the virtual conference calls over the past year two years due to COVID-19 .
The meetings include visits with NEC network equipment suppliers data center operators and leaves their suppliers.
They are going very well.
And we expect to continue to follow up and to add to our customer list in the coming weeks and months.
The customer landscape for boy it breaks down into two distinct type of customers.
Those for what I'll call, our standard products and those that are new and novel designs that take advantage of the optical into Posers unique features.
Our standard products include our 100 G. At 200 G. C. WDM four allow for Fr four and 400 G and receive optical engines to which we will add 400, GFR four and Dr. Four transmit engines later this year.
All of these optical engines will be assembled and sold through Super Photonics, our joint venture with <unk> located in Chairman China Boy.
Boyfriend design and sell our more advanced products, beginning, but 400 G outside of China, and extending to our 800 G. One six database products and beyond.
Once customers have completed reliability testing using a beta samples, we expect that they will place purchase orders direct EBIT SPX for initial production units.
We currently have three such customers in China, who have committed to using our optical engines.
With several more customers in the pipeline.
And others asking for more advanced designs.
Customers interested in our standard products and looking for a means to grow their market share against large module suppliers.
Fiber for example is a company that sees boy it as a means to both expand market share and adopt a platform that will allow us to offer multiple generations of product at higher speeds.
The advanced designs are more custom product sales will be handled by point.
These usually require more design and engineering efforts and expense that is typically covered by the customer and what we call an R. E are nonrecurring engineering payments.
This type of sale is what is customarily associated with a design win.
We have three such projects ongoing at Boyd.
Yeah.
Since signing the joint venture with <unk> in October 2020, we have been building Super Photonics company in Sherman call locally co located with Sun on IC.
Boyd recruited most of the senior staff of SPX and IMD representative member of the JV Board from point.
The company now has Turkey personnel and all of the equipment needed for the first production line.
For the assembly and testing of optical engines.
They are actively engaged with our teams in Shenzhen in Singapore as well as in Allentown to produce samples and evaluation boards for the 20 or so companies that have requested samples of 100 G and 200 G optical engines.
They are also refining all of the assembly and the testing steps with the objective of reducing production time, increasing yields and preparing for production.
The building of critical capabilities in Singapore, Allentown, Shenzhen and Super Photonics aligned with the talent that these hubs provide for semiconductors photonics optical electronics, it's being fruits endeavor of prophylactic hitting the industry.
But the optical into poser based solutions.
Key milestones for SPX and four points for the remainder of this year.
To deliver beta samples to customers, Florida, three contracted advanced projects.
Oliver beta samples on evaluation boards to other potential customers globally.
Released the products to production and to prepare for ramping volume.
And produced the first samples of a 400 G transmit optical engine.
We all know the advantages that the point optical into poser brings to the optical transceiver and co packaged optics market.
And are confident that customers are beginning to understand the benefits as well.
We are highly motivated with a strong team and expect to grow the company in these markets as well as to other vertical markets like artificial intelligence intelligence accelerators chips and variables for health monitoring.
I'll now turn it over to Tom Mike Boyle CFO to review the overall financial business highlights for 2021 and to provide some insight into 2022.
Thank you.
Thanks Vivek.
I would like to take a few moments to review the financial highlights for the year ending December 31st 2021.
To speak to our recent listing on the NASDAQ.
<unk> to reach out to both retail and institutional investors.
The company recognized a small amount of revenue in 2021, just over $200000 for nonrecurring engineering.
Which was the first revenue recognized by the company in three years.
<unk> our payments from customers for engineering work to adapt the optical your poser for specific application.
In this case the 200000 represented a partial payment for architect thing for of our optical engines into a single module.
This customer also placed a purchase order for initial units of optical engines for a combined value of $1.2 million.
Overall operating expenses for the year ending December 31st 2021 rose to $17 3 million, an increase of $2 5 million over the prior year.
Collecting a large increase in head count to approximately 50 at year end compared to about 25 as of December 2019.
We added to our engineering admin and management teams.
Overall cash used in operations for the year was $11 4 million compared to $9 7 million in the prior year.
For the first time, we recognized a gain on our contribution of intellectual property to the joint venture and at the same time also recognized our share of the losses.
Both the gain and the loss were noncash charges.
On a per share basis, our net loss was <unk> 45 for the year compared to 62 cents loss. The prior year all based on the consolidated churn levels.
Our cash burn remains at $1 million per month, which was the same for the prior year.
Cash and cash equivalents plus short term investments at year end stood at $21 3 million.
<unk> to $6 9 million at the end of last year.
We had cash inflows of a <unk>.
By $28 million.
With $12 million from the public offering and 16 million of warrant and option exercises.
We repaid all outstanding convertible debt of $3 3 million almost entirely through the conversion to equity.
The company committed to invest about $1 million in Capex.
Against which we paid approximately 800000.
We exited the year with one of the strongest balance sheets and liquidity, we have ever had with $21 3 million in cash and short term investments no debt and sufficient working capital for more than 14 months of operation.
The company continued to invest in patents.
18 of our portfolio, specifically related to the optical inter poser and.
In addition, we have 21 applications filed on three other applications in preparation.
In order to reduce a large backlog of recorded patentable ideas, we brought in Dr. Robert <unk> as VP of intellectual property in December .
Got it to zero has been working with Hudson's and outside consultants since 2017 on our patents and other intellectual property issues.
Subsequent to year end the company proceeded with a direct listing and began trading on the NASDAQ capital market on March 14th.
It was preceded by a 10 for one consolidation of our shares which took effect on Monday February 28.
Regarding the recent NASDAQ, let's say, it's important to note that the benefits.
<unk> exposure to a broader investor audience are not expected to be immediate.
The NASDAQ listing itself is not a magic bullet, but it is important for enabling access to our shares by institutional investors in the U S as well as internationally.
Courts previous trading on the OTC Truex and on the PSX venture exchange restricted many institutions from investing and therefore also from doing the prerequisite due diligence on the company.
Institutional investors have large portfolios, which entails doing research and following a lot of different companies and stocks.
Fortunately they don't buy into a new company simply because it's now listed on the National exchange.
It does increase their motivation to do more homework on the company and we anticipate that the benefits of our NASDAQ listing will be realized over time.
Regarding the recent trading pattern and poet chairs I believe this is largely a byproduct of the change in overall market sentiment, which has gotten significantly more negative over the past several months.
With the exception of a small number of Mega cap companies.
NASDAQ composite index nearly everything in the technology sector and smaller cap has performed poorly since the beginning of the year.
Fact, 75% of all NASDAQ stocks currently trading below their 50 day average and over 82% of all NASDAQ stocks are trading below their 200 day moving average.
Looking at smaller technology listed on NASDAQ there are numerous companies that are down.
30, or 40 or more than 50% year to date.
During the last week more than 1000 companies over 20% of all NASDAQ listed companies have set new 52 week lows.
While poet management shares in your frustration about the recent stock performance. There are relatively few companies or stocks that had sustained trading that is counter to the trend of the larger market.
We believe the main reason for going to the NASDAQ when they sound with our thesis and pack.
And we expect the additional opportunity of attracting institutional investors to our stock.
Not previously available to us.
Any share price gains that we achieve will be longer lasting than those we experienced on either the OTC <unk> or the <unk> venture exchange.
I can assure you that we are not expecting our exposure to investors or any increase in our share price to happen on its own.
At the beginning of the year in preparation for our direct listing we began a number of initiatives to reach out to both institutional investors in the U S and Canada as well as retail investors in both markets, we substantially increased our media outreach with articles in several key journals, which were distributed through <unk>.
People channels, we produce several videos in house for our Youtube channel.
And those were highlighted by at least two stock channels.
Our engagement with social media increased substantially over last year with double digit increases on key platforms.
Our engagement with north equities multiplied our efforts with direct messages to 35000 followers and impressions overwhelmingly positive on platforms, such as discord telegram and Twitter.
To attract institutional investors. We are also in need of additional cell sites.
We are in discussions with the analysts have several prominent banks in the U S.
What that may take to achieve such coverage and there has been significant interest expressed based on our recent success at OFC.
That completes our prepared remarks, and we will now open the call to questions for that I'll turn it over to the operator.
Ladies and gentlemen, we will now begin the question and answer session. If you would like to ask a question. Please press the star one to remove yourself from the queue press the pound key one moment, while we compile the Q&A roster and preparing to take our first question.
Our first question comes from Lisa Thompson with Zacks investment Research Your line is open.
Good morning, and thank you for finally, having an earnings call. This is very exciting.
Thanks Lisa.
Yes.
So.
I will just focus a little bit I mean, you pay so much information is hardly anything to ask at this point.
I'm interested in this company that you have a contract with it says you're going to pay $1 $2 million is that some sort of minimum or how does that work and how does the company introduced the product.
At a trade show and not have even thought Scott components of the product.
Before the announcement, so there must be something in Q1 correct.
Well I mean, usually.
Companies have they.
They make future announcements on availability of capability.
And so that's what companies do they introduce.
A future product and so in this particular case that that's what was done.
Of course with these customers we've been working for a while I mean, obviously, we've got samples and you know they're building their designs and their triplets and so on and so forth to go with it so.
That is not.
Necessarily different from the norms and the industry. It was just nice for us to see.
That our solutions are going into products that are then getting announced and you know they have to also build their customer base.
And on that product base.
In terms of you know I guess initial I would say and I'll read plus initial production later it doesn't represent what we believe the business is going to be work.
It is just very initial commitment in terms of.
So.
Yes.
Yes.
Yeah. So as you mentioned so Lisa.
When we get into a custom design and product there is two parts.
Parts to it one is.
Being compensated for this customization through the NRI, but also most if not all of our objective when we engage with customers. We're after developing designing and developing the product we expect on the customer expects to go into production.
So it's not just a design service right.
So what we use.
Usually negotiate that and in this case, we did that there's at least an initial advanced Peel that once the design is done we have.
I feel for our products. So that is just an initial as Serge mentioned, we would expect that to ramp up.
Product volumes as our customer gains traction.
Did they have to say when we announced the product when they expect it to be available.
So we are working closely with them.
Oh, yeah. So it's a very close collaboration as you can understand because that product is based on our optical engine. So as we've mentioned on our road map and really get into production. Later this year. So that is aligned with their products and getting into so they do have.
Previous generations of products. This is a next generation so they have traction at customers, it's getting into that next.
Generation products introducing back to their customers so.
That's I think that should give you an idea.
Okay, great that helps and the JV I guess fiber con is supposed to be the first customer to start.
So it might.
But.
So customer we weren't able to announce you know as you know we cannot customers our seats. They wanted to their their differentiation using our next generation platform like ours. So five booked up is one of them. We are working very closely making great progress and we plan our fiber.
Plans to get into production also aligned with our production schedules.
So will they be the first are the only ones that you can use their name.
At this time, yes, so we keep asking customers of course.
But at the same time customers value.
Their differentiation and using our you know our engines. They don't wanted to relate to their competitors. So it's it goes back and forth because as we get.
Customer.
[noise] acceptance or approval to release names, we would like to do it especially for our shareholders too.
<unk>.
We understand and realize that we are gaining quite a bit of traction just because they are not hearing names doesn't mean, we're not getting traction.
Right.
Well I've had this conversation with Tom is there any way that we can tell that your product is inside somebody else's.
Hi, its box or something other than ripping it apart and looking for your names Gantlet somewhere.
Yes.
I mean, there was a there was a case, where you know, we're obviously doing our product costs come in.
Third customer potential customers out there that come by or CFO , you are doing and they immediately figure it out but you know we were likely the only way that particular product could have been done. So I mean, there are certain skus that would suggest that we will.
Would be inside the product, but I suppose at some point when the products are actually released those things will become public and they are.
Understood and available you have to understand that.
The dynamics in there might be other questions relating to the same topic that you know I might as well just bring up an answer now which is.
We're an integrated optical engine, which means our optical engine comes built them with lasers going T D.
And other components, so we're basically supplanting.
An existing supply chain associated with these other components you know went up when a customer utilizes our engine. So clearly you know the sensitivity associated with that.
In the case of our 100 gig engines, you know, we're using lasers photo detectors from sand that these customers are already using you know well other lasers and other photo detectors. Then there is a change in sensitivity associated with these kinds of things so.
But does erect that kind of.
So no we can you know we're.
We're all done.
It's gonna be really hard to do.
That kind of visibility and transparency.
Yes, so Lisa just to add there as you know most of our products are going into these MSA form factors right multi source agreement so from the outside they all look similar.
Except fault cases exploration mentioned, where some people can put two and two together right that they could only achieve a certain.
Certain application or you know to.
The way of doing things by using our engines. So they can put two and two together otherwise from the outside they all look similar so.
Difficult to identify that they are using our engine inside.
Okay. Thanks, I think we should move on to other questioners. Thanks Lisa.
Okay. Thanks, Tom.
Our next question comes from Kevin Dede with H C. Wainwright Your line is open.
Hi, good morning folks thanks for taking my questions.
Maybe just to address leases perspective, you could put a little sticker on the.
On the module it says poet inside.
They can take a page from Intel.
So Raj would you mind, just reviewing from a high level I guess, you mentioned three standard products and contract and three.
Custom products and contract can you review the timeline to market for those three let US know if you have signed agreements there.
If there is.
Stipulations around volume.
The details you can share with us publicly please.
Right.
Okay.
Yes, so we have announced.
Two of the contracts.
Which are signed contracts and there is a third one which is.
A commitment on both sides and we are working together okay.
So that is there in terms of volumes, Kevin as I mentioned it is aligned since that products are very much dependent on iron Jen.
We are also dependent on their schedule off they complete module for relief.
Interdependent and we expect by towards the end of the year those would start production. Okay. Generally speaking the standard products are more where either the customer like fiber top is trying to.
Produce our product and take share from incumbents. Okay. So although they can bring the product out of plus they will have to win to win business and.
Get the volumes out, but as I mentioned.
Our interactions with customers on customers clearly understand the objective is to get into production, but future volumes.
It's not a design service that we are doing so that is very well understood and we.
We expect to be in production with most of these by towards the end of the year.
Kevin just to clarify on the advance projects all three of those have contracts associated with them.
Okay.
Yeah and standard products it doesn't really require a contract until they want off maybe walk in for volume once they qualified the product and have decided that they're going.
Going to.
Introduce and win business from their own customers.
Yeah. So I wanted to mention Kevin that even though and for standard products. So there is no contract, but those customers are actively designing their solutions using our engine, which is a big commitment.
For us right.
So there's an eerie associated and the customer side, but not necessarily on the standard side is that right.
Correct assumption, that's a good way to look at it yes.
Okay.
Can you just can we talk a little bit about supply chain I know Suresh mentioned a little of this.
And I understand the secrecy associated with it but I'm wondering how you would assess changes in your ability to source product.
Given.
Logistics issues related to COVID-19 or not.
Sam's operating and not can you give us your perspective on that and how comfortable.
Or whether or not your level of comfort has improved versus where we were say 12 months ago and how you might see it looking forward 12 to 24 months.
I think there you know.
Obviously.
Looking from the outside it's really difficult Reagan none of this is necessarily tangible from somebody is sitting in San Francisco, but as much as you could share.
On the logistics side of things and manufacturing vis vis China Covid logistics transportation.
Sure Kevin I mean, I think the I think I think.
There are I mean, there are clearly many issues associated with the supply chain, but we are we continue to face as a company port I mean, just on a broader grander scale I should just so you guys have visibility and I'm sure you do but it is the appreciation you know this this.
This prolonged shortage you know starting with Covid.
Continuing with Covid.
And you know now with the war in them.
A whole bunch of things geopolitical.
It's been a challenge on the stress on small companies I mean, this is an environment, where a big company that gets bigger because they have the cloud from the buying power and everything else and so all of the initial supply is targeted for the big guys and so some of us.
We've got you.
Lead times that can be 52 week long I mean in terms of quarterly prime so.
What we've been doing to manage this.
Kind of systematically looks at where our dependence fees are.
And in the risk mitigate to the extent that we can you know so.
We are sole source, that's cool tariffs will be manage that very very closely from a relationship perspective, so we get what we want.
We've got an arrangement, where we buy a certain number of waste or the months. So theres four than there is.
Predictability associated with our orders and for US there is predictability in the place.
But outside of that substrate supply.
Other equipment spare parts supply you know, we're kind of managing a lot of that internally too frankly.
Reordering relationships that we have.
And leveraging that.
That said I should say one area that we did.
C N issue and we're now working hard to mitigate our risk there is the modulator if you recall.
Last year, we announced an agreement with <unk> in China to supply us with modulators compatible with our platform and our platform has been ready since January so we will see these modulators, but.
Due to their supply chain associated with their foundries and delays in and with the shutdowns in China.
They've had some challenges delivering to us so.
We do see these impacts.
The best we can do is to manage them with dual and triple sources.
Well a couple of months ago, we started actively engaging with alternate suppliers for modulators, because we see the risks.
And so we tried our best to mitigate ourselves from a schedule perspective, I think we've done exceedingly well.
Relative to what we see in terms of how people both cycle time was relative to what we've been able to accomplish could we have done better absolutely but.
To the extent that we have things in our control we have executed flawlessly and I think where we felt challenges is in some interactions with third party suppliers that.
We've had to deal with.
Oh strikes Kevin we've got a couple of other questioners in the World will have a few minutes left or would you like to give them an opportunity to ask absolutely. Thank you. Thank you for entertaining my questions gentlemen, welcome.
Alright. Our next question comes from Tim <unk> with Northland Capital. Your line is open.
Hi, there good morning.
I wanted to.
Continue to focus on the.
On the committed customer sort of topic here.
I assume we should relate I think what you've described as the three maybe JV based standard product relationships and the three.
Kind of poet custom projects with the six committed customers that you.
Outline kind of in your final slide here and I guess I had a couple of questions about that which is.
You know given the size of the pipeline above that I guess as we look you know me.
To the end of this year, where do you see that that six.
Committed relationships going do you have a kind of a target for.
What that might look like in the future and as an aside mic that included a direct relationship with a cloud operator.
And if we look at those current six committed.
Relationships any sense of the market opportunity or revenue opportunity associated with what you have now and I have a follow up.
So I can address the <unk>.
The customer traction here.
So Tim.
Yes. Thanks for your question. So the more custom type of designs you know, it's it's a we are engaged with certain opportunities and customers and we.
We do believe.
Couple of them will pan out towards the end of the year theyre not going to be several opportunities that guy also difficult for us to handle many of those so you can you can view that as maybe a couple of more towards the end of the year.
There are more advanced so they do take longer to get into revenue and things like that as you can imagine okay.
The others the more standard we are continuously expanding our funnel and pipeline and we have many.
Engagement says we are rolling out samples getting getting traction they are seeing the benefit of the engine and their products so that could be many more.
<unk>. Okay. So that is really the way I would say you can look at it.
Does that answer that part of your question Tim.
Absolutely.
Okay great.
The revenue I'll leave it to Tom our CFO .
Well.
We're not really providing guidance on that I mean, Tim.
We're building our business plan and.
Our business plan shows revenue in the second half from some product and initial product revenue and then ramping in 2023, but we haven't given an indication of the scale of that yet largely because.
We need more insight into what our what our customers' volumes are expected to be.
Got it fair enough and if I could follow up on the engagement with the.
The NRT.
Engagement, there, which you know with what looks to be a pretty sizeable I dunno switch router supplier or what have you in.
Can I ask you what do you consider if you can say anything more about the type of application.
You might be working on there I know you've got both eller for an <unk>.
<unk> M for capability typically prefer we see on routing and optical transport equipment.
For shorter reach type interfaces, although there seems to be some potential too.
For applications kind of inside data center switching as well I'm wondering if you could provide any more color without you know on the direction of that application.
So, but how much we can reveal here.
Is a unique application where rates are we mentioned that multiples for all of these engines in each case is used so its.
Save four times 100, G and Youre right in saying that these are used in core routers and switches.
So disconnect from the core router downstream into the data center.
So the.
The end customers would be the.
Top.
Core router or switch providers.
Yeah.
Got it thanks I'll pass it on.
Okay.
Yes.
Thanks Dale.
We have one more question here I think we have enough time.
Our next question comes from Sujit de Silva with Roth Capital. Your line is open.
Hi, Suraj the Thomas Thanks for squeezing me in here I'll try and keep this brief so and congratulation on all the progress so are the the.
Customers of six that you've talked about I'm wondering.
Are these is this one design and per customer are there multiple designers and they need a certain bandwidth limitations on number of projects. We can handle but I'm curious are there multiple design ins for customer potentially.
So these are presently projects.
And some customers as we mentioned would have following so once its a platform right. So once they design. Our engine for example, fiber topped 400 G. C. WDM four they do have the intention and so do we need to work with them for 200 to 400 G.
So presently the six customer opportunities are.
Their customer opportunities.
Yes, but there is yes.
Multiple customers here.
Yes.
I just wanted to provide one distinction here I mean, when we say opportunity I mean these are customers that are actively designing their products based on our solutions. So there is I mean, whether it's contracted committed engaged I mean, you can use different words, but these are people that are truly designing their product with our engines in line with our footprint.
With our pad locations in mind.
And so it's.
It's well advanced.
Not one of those things that were kind of starting the dialogue.
Okay.
Okay, Great and then another quick question on the modulator supplier delays.
What's the timing of the readiness of alternative solutions here I know youre working hard to kind of have multiple sources.
Yes.
It's there.
The world of Silicon Photonics modulator.
Google bought regime as you know.
And there are two issues one is the supply the land one of the technical challenge that modular companies have faced so.
In the case of plan looks like we're dealing with the supply chain challenge, but in the meantime, there've been other customers other suppliers that have announced.
Availability. So we are actively in dialogue with them to gain access to the cause that supply I would say.
About a quarter within the quarter or we should.
In a position to evaluate alternate solutions.
Great very helpful. Thanks, guys.
Okay.
This concludes the question and answer session.
I'd like to turn the call back over to management for any closing remarks.
Yes. Thank you.
Thanks again, everyone for your time this morning.
I think Tom Vivek and I very much appreciate everyone's continued interest in Poland.
We really look forward to talking with you and seeing many of you in person someday soon.
Have a great day everyone.
Thanks again.
This concludes today's conference call. Thank you for joining us today.
Okay.
Yes.
Okay.
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