Q3 2023 Applied Optoelectronics Inc Earnings Call
Good afternoon, I will be your conference operator at this time I would like to welcome everyone to applied Optoelectronics third quarter 'twenty twenty-three earnings conference call.
All lines have been placed on mute to prevent any background noise.
After the Speakers' remarks, there will be a question and answer session.
To ask a question you May Press Star then one on your Touchtone phone to withdraw your question. Please press Star then two please note. This event is being recorded.
I will now turn the call over to Lindsay Savarese Investor Relations for a Oh hi, Mr. <unk> you may begin.
Thank you Lindsay Savarese Investor Relations for applied Optoelectronics I'm pleased to welcome you to NOI third quarter 2023 financial results conference call.
After the market closed today <unk> issued a press release announcing its third quarter 2023 financial results and provided its outlook for the fourth quarter of 2023.
The release is also available on the company's website at Arrow bashing Dot com.
This call is being recorded and webcast live a link to that recording can be found on the Investor Relations section of my website and will be archived for one year.
Joining us on today's call is Dr. Thompson, Lin Aoi's, founder Chairman and CEO and Dr. Stefan Murry, Aoi's, Chief Financial Officer, and Chief Strategy Officer.
Thompson will give an overview of Aoi's Q3 results and Stefan will provide financial details and the outlook for the fourth quarter up 2023, a question and answer session will follow our prepared remarks.
Before we begin I would like to remind you to review Aoi's Safe Harbor statement.
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 levels of activity performance or achievements of the company or its industry to differ materially from those expressed or implied in such forward looking statements.
In some cases, you can identify forward looking statements by terminology such as believes forecasts anticipate.
Estimates suggest.
Predict expect.
May should could would will potential or things or by the negative of those terms or other similar expressions that convey uncertainty of future events or outcomes.
The company has based these forward looking statements on its current expectations.
Some estimates and projections.
While the company believes these expectations assumptions estimates and projections are reasonable such forward looking statements are only predictions and involve known and unknown risks and uncertainties.
Many of which are beyond the company's control.
Forward looking statements also include statements regarding managements beliefs and expectations related to the expansion of the reach of our products into new markets and customer responses to our innovation as well as statements regarding the company's outlook for the fourth quarter of 2023.
Except as required by law, we assume no obligation to update forward looking statements for any reason after the date of this earnings call.
Form these statements to actual results or to changes in the company's expectation.
More 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 the SEC, including the company's annual report on Form 10-K for the year ended December 31st 2022, and the company's quarterly report on Form 10-Q for the quarter ended.
September 30th 2023.
Also all financial results and other financial measures 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 we present non-GAAP financial measures are included in our earnings press release that is available on our website.
I'd like to note the date of our fourth quarter and full year earnings call is currently scheduled for February 22nd 'twenty 'twenty four.
Now I would like to turn the call over to Dr. Thompson Lin applied Optoelectronics, founder Chairman and CEO Thompson.
Thank you Lindsay and thank you for joining our call today.
So a quarter revenue and non-GAAP EPS.
We started the tissues.
All of them get cosmology.
<unk> always been tissues, we are please.
The progress we have made.
Improving gross margin.
The continuous cool you still below one.
For the G to adults is not there.
The BV during Q3.
Good foundational agreement goals and needs.
Proving gross margin so low.
Oh.
Generate $3 million.
Just you made during the.
Quarter.
During the third quarter, we'd be at equilibrium of $52 $5 million.
What we see Oh God, there's wage of $16 million to $56 million, we delivered non-GAAP gross margin of 32, 5%.
Well, Bob I'll try this range.
And Mike one 5%.
So do you want to say.
Many treated.
Favorable put a mixed shoot.
Sure.
Good evening.
As part of our nonrecurring globally from Microsoft.
Oh, no good loan Oh shoot.
What we see okay. This is rich.
Oh, Steve Sin.
One thing.
But it really did not see a television signals.
Well, Tim Poole and $3 million.
<unk>, 7% year over year been up 10%.
Yes.
You still expectation.
Okay.
Total revenue for our data center products.
$48 million more than doubled year over year increase 76%.
Sequentially.
Largely due to increased demand for all but one on J D.
<unk> production.
As we continue to see the Linda.
<unk> production.
Good and you.
One of the product.
People year over year.
I believe what do you mean for our one <unk> product increased more than 10 times.
With that I'll turn the call over to Stephanie to review the details of our Q3 performance.
People didn't.
Thank you Tom.
As Thompson mentioned, our third quarter revenue and non-GAAP EPS were in line with our expectations.
While our non-GAAP gross margin was better than our expectations.
We are pleased by the continued progress we have made on improving our gross margin and by the continued strong demand. We saw for 100 G and 400 G products in our datacenter business during Q3.
A combination of revenue growth and improving gross margins allowed us to generate $3 million and adjusted EBITDA during the quarter.
Before turning to discuss our detailed results and outlook I want to provide an update on the sale of our manufacturing facilities located in the People's Republic of China.
Certain assets related to our transceiver business and multichannel optical sub assembly products for the Internet data center fiber to the home and telecom markets.
On September 12, 2023, we announced the termination of a purchase agreement with Johan <unk> electronic technology.
This decision was based on do you want to tell you to meet agreed upon deadlines and the lost confidence in their ability to complete the transaction.
We are exploring additional options with new potential buyers.
Turning to the quarter, our total revenue for the third quarter increased 10% year over year to $62 $5 million, which was in line with our guidance range of $60 million to $66 million.
As Thompson mentioned the increase in revenue was largely due to growth of our 100 G and 400 G datacenter business.
During the third quarter, 78% of our revenue was from our data center products.
16% was from our CATV products with the remaining 6% from F T Th telecom and other.
In line with our expectations CATV revenue in the third quarter was $10 $3 million, which was down 67% year over year and up 10% sequentially.
We are encouraged by the sequential growth that we saw in our CATV business in Q3.
Looking forward, we continue to expect that our near term CATV business will be down compared to the historic highs. We saw in 2021 and 2022 as the Msos transition to next generation architecture.
We anticipate this transition will begin to take place in 2024.
Looking further ahead, we continue to carefully monitor MSU plans to move to DOCSIS 4.0 networks.
And we continue to believe <unk> is a leader in technologies that will enable DOCSIS four point out.
And that our products are well suited for wanting to push to install amplifiers and other network elements for DOCSIS four kind of it begins.
In line with our new strategy of directly sorry to the Msos, we have continued to expand our product portfolio.
Just last month, we announced the launch of quantum like the latest solution within our quantum bandwidth line of products designed to provide the management and monitoring of cable amplifiers that we believe will reshape the cable broadband market.
Operators using quantum leap will now have the ability to remotely manage cable broadband amplifiers.
<unk> in a new era of efficiency convenience and enhanced service quality for our customers.
Last month, we attended the society of cable Telecommunications engineering extra or S. T E will be demonstrated our complete line of quantum bandwidth products, including various amplifiers in the quantum leap control solution I mentioned above.
We've received very positive reactions from many of our customers. They are particularly interested in our quantum like solution.
With several customers have asked to become a standard for the CATV industry.
We are pursuing the standardization with cable labs and anticipate that this technology may be chosen by Msos as their preferred control architecture for their upcoming deployments.
Lastly, and in line with our new strategy. We are pleased to have secured a distribution relationship with did you call a stocking distributor did.
<unk> will be an exclusive go to market supplier of our quantum 12 hygiene balance triple and hygiene dual system amplifiers and light extenders.
This relationship enables customers to receive the latest network equipment with the same quality and performance they expect while providing the industry's best product delivery lead times.
Turning to our data center business, our Q3 data center revenue came in at $48 $8 million, which more than doubled year over year and was up 77% sequentially.
Largely due to increased demand for our 100 G and 400 G products as our customers continued to purchase our existing products.
In the third quarter, 74% of our datacenter revenue was from our 100 G products, 13% lift from our 204 hundred G transceiver products and 7% was from our 40 G transceiver products.
Notably revenue for 100 G products increased 75% sequentially, while revenue for our 400 G products increased 74% sequentially and accounted for just under 11% of our total data center revenue in Q3.
Looking ahead, we are encouraged by the strong demand we've been seeing and we expect Q4 to be similar to Q3.
As a reminder, as we have discussed on our prior couple of earnings calls, we signed two agreements with Microsoft earlier this year.
<unk> a development program to make next generation lasers for its data center, both for 400 G and beyond and for the development of their 400, <unk> and next generation active optical cables.
While not guaranteed we continue to believe that the revenue opportunity for our 400, <unk> and 800 G products could be greater than a longer duration than the revenue contribution we saw from this customer during the peak of the 40 G product cycle, which suggests that revenue from these products may exceed $300 million over the several years of these build outs.
During the quarter, we received request from Microsoft to expedite our production ramp for these products, which we are attempting to accommodate.
Based on these expedite requests we believe demand for these products remained strong and our production teams are working very hard to add capacity for this production, which we now expect will allow us to begin shipments later this month rather than in late December as originally planned.
Notably the revenue increase we saw from Microsoft This quarter is for most of the existing products.
As I just mentioned, we still expect to begin shipping initial quantities of the products related to these new agreements to Microsoft by the end of this month further testing.
I believe that production will begin to bring up to December.
We also believe that the value proposition that we offered a Microsoft is just as strong with other data center operators and we are working with several of them to evaluate our technology and qualify our products.
This includes our 800 G products.
During the quarter, we shipped samples of our 800 G datacenter products to two different customers.
At the end of the year, we expect to ship samples of 800 G products to two additional data center customers. This would bring our total to four different data center customers, who we'd be evaluating our 800 gig products by year end.
Now turning to our telecom segment.
Revenue from our telecom products of $3 million was down 55% year over year and down 27% sequentially largely driven by softness in <unk> demand, particularly in China.
Looking ahead, we expect telecom sales to fluctuate around current levels.
For the third quarter, our top 10 customers represented 96% of revenue up from 86% in Q3 of last year.
We had two greater than 10% customers one of the data center market and wanted the CATV market, which contributed 64% and 12% of our total revenue respectively.
In Q3, regenerative non-GAAP gross margin of 32, 5%, which was above our guidance range of 29, 5% to 31% and was up from 24, 8% in Q2 of 2023.
Up from 18% in Q3 of 2022.
The increase in gross margin was driven mainly by a favorable product mix shift in contribution from revenue recognized as part of our nonrecurring revenue from Microsoft.
We remain committed to the long term goal of returning gross margin to around 40% and believes that this goal is achievable.
Total non-GAAP operating expenses in the third quarter were $21 4 million or 34, 2% of revenue.
Which compared to $19 four or 34, 3% of revenue in Q3 of the prior year, largely driven by increasing legal costs increased shipping costs commensurate with our increased revenue and increased marketing spend to promote our CATV products.
Looking ahead, we expect non-GAAP operating expenses to range from $21 million to $23 million per quarter.
non-GAAP operating loss in the third quarter was $1 million compared to an operating loss of $9 $3 million in Q3 in the prior year.
GAAP net loss for Q3 was $9 million or a loss of 27 cents per basic share.
Compared with a GAAP net loss of $15 $6 million or loss of <unk> 56 per basic share in Q3 of 2022.
On a non-GAAP basis net loss for Q3 was $1 7 million or a loss of five cents per basic share, which was in line with our guidance range of a loss of $1 $9 million to a profit of zero point $2 million or loss per share in the range of six cents to earnings of one per basic share.
And compares to a net loss of $7 $1 million or a loss of 26 cents per basic share in Q3 of the prior year.
The basic shares outstanding used for computing the net loss in Q3 were $32 8 million.
Turning now to the balance sheet, we ended the third quarter with $31 $2 million in total cash cash equivalents short term investments and restricted cash.
This compares with $28 $6 million at the end of the second quarter of this year.
We ended the quarter with total debt, excluding convertible debt of $46 $6 million down slightly from $46 $9 million at the end of last quarter.
As of September 30, we had $67 $5 million in inventory compared to $66 3 million at the end of Q2.
We made a total of $2 $1 billion in capital investments in the third quarter, which was mainly used for production and R&D equipment.
As we disclosed in March we initiated a new at the market offering.
To date, we have raised $43 $1 million net of commissions and fees under this new program, including $22 million raised in Q3 and $11 $2 million raised after the end of the quarter.
Moving now to our Q4 outlook.
We expect Q4 revenue to be between $63 million and $67 million and non-GAAP gross margin to be in the range of 34, 5% to 36%.
non-GAAP net income is expected to be in the range of a loss of zero point $9 million to income of $1 2 million and non-GAAP income between a loss of <unk> <unk> per basic share and income of four cents per basic share using a weighted average basic share count of approximately $35 1 million shares.
With that I will turn it back over to the operator for the Q&A session operator.
We will now begin the question and answer session.
To ask a question you May Press Star then one on your Touchtone phone.
You are using a speakerphone please pick up your handset before pressing the keys to withdraw your question. Please press Star then two at this time, we will pause momentarily to assemble our roster.
The first question comes from Jeff coach with Raymond James. Please go ahead.
Yes, Thanks, guys are in for Simon.
Just really quickly on the Microsoft.
Income that's nonrecurring can you talk about maybe quantify it for the quarter and like what's built into your guidance and how we should.
Think about that relative to the ramp.
Be helpful. Thank you, yeah, well I can't comment on the exact amount of nonrecurring engineering costs that would be covered under a nondisclosure agreement with Microsoft So.
It was not the primary contributor.
The decrease in gross margin.
Got it.
Okay, Great and then maybe you can just give us some color on.
The segments like kind of how you're thinking about some of the other segments are going into December.
Yes, well as we noted there.
Sure, Yes, so as we noted.
We're pretty excited about the progress that we're making on the datacenter business.
As we mentioned.
Microsoft is accelerating there.
Demand for the new products that we've been discussing.
Based on the new contracts that you have that's really positive for us I mean, there's a limit to how fast we can speed up the production of course, so it's you know it's.
It's not going to dramatically change our revenue picture in the fourth quarter, but we're encouraged by the increase in demand that we're seeing.
Were also really encouraged by the progress that we've made on 800 G. As we noted we sampled that already to several customers and we expect to sample it to slip one more customers before year end. So we're really excited about both of those and the progress that we're making on that front.
On the cable TV side of things we did have.
Have you seen from from the other companies that have reported already.
Situation in cable right now across the board is muted compared to where it was a year or two ago for sure, but we're encouraged by the sequential uptick in revenue there.
And the progress that we've made in terms of our new model of selling directly to the msos and the acceptance that the msos are part of our new technologies like quantum leap, which we talked about in the prepared remarks earlier has been really phenomenal and we're really really excited about the progress that we've made there as well so those two segments I think.
Obviously account for the vast majority of our business the telecom market will be somewhat muted as we noted the <unk>.
And China has been relatively slow and I don't necessarily see a recovery of that in the short term at least.
But certainly the two business segments that are trough with the vast majority of our renewables heading in the right direction.
So could you.
Could you see cable TV.
Sequentially.
December or do you think of it.
We continued to see.
Sequential growth.
And then is it when do you see an inflection there from like you were saying is that for DOCSIS.
4.0 is that more of them.
24 right.
Cutting in and out there a little bit that I think I understood. Your question to be on cable TV, we expect to see some sequential growth into Q4.
And I.
I think you could tell from the guide we don't expect dramatic.
Growth in cable, but there's probably some opportunity for some growth there as we discussed.
The cable market will recover we expect the cable market to recover.
Substantially during the DOCSIS 4.0, introduction, which will happen in the middle part of next year.
In the meantime, we are seeing some customers that are finally, starting to burn through their inventory of DOCSIS three one products. The one two gigahertz.
Expect to see some sort of modest improvement there, but the dramatic uptick that we expect to see you'll be with boxes for pointed out with the middle part of next year.
Basically this is Tom.
With <unk>, we can see based on girls in next year from I would say.
And in Q2 or sometime in Q3 and next to us.
And more important.
The gross margin will be much Pedro.
The key is known you'd wait movies gross margin improvement.
[laughter].
Terrific I appreciate the I appreciate the time thanks.
Again, if you have a question. Please press Star then one.
The next question comes from Tim Sullivan go with Northland capital markets.
Please go ahead.
Hey, good afternoon, and congrats on the results.
Positive EBITDA in particular.
I have a question about the kind of pull in that we're seeing from Microsoft in terms of.
400 gig IOC type demands.
And I guess, one would be to what extent is that a factor.
In your guidance for Q4.
And assume given you are ramping up production this month and through December.
That looks like.
Got you up full of FERC for a full quarter of production perhaps.
In Q1.
And I'd love. It if you can give us a sense of what that looks like for you guys from a revenue standpoint, or what might that look like thanks.
Sure so.
Your question about Q4, I think is.
The answer to that is it.
We are we're just beginning the production in Q4, so we don't expect it to meaningfully contribute to revenue in Q4. The reason for the commentary that we've been giving is just to illustrate the fact that the demand is.
It is still very strong for Microsoft.
And in fact I believe from other.
No other data center operators as well as we talked about.
However, our ability to increase the production capacity is.
We're doing the best we can but it's going to take us a little bit of time to get there right. So.
We're not going to be fully ramped right at the beginning of Q1, either there'll be some continued ramp during Q1.
And in fact based on the production targets that they've asked us to meet there'll be some increasing production capacity pretty much throughout next year, it's not going to be done in a month or even a quarter.
So there'll be some improvement throughout the year in terms of our capacity there.
The encouraging thing for US really is again that Microsoft is really.
Looking for us to make these products in greater quantities faster.
And that's an exciting thing for us with respect to exactly how much.
We will be in Q1, we havent given guidance for Q1, yet a lot will depend on the progress that we make over the next month or two but certainly we believe this is incrementally positive in terms of timing and our overall production rate into Q1, and we're excited about that.
Great.
I wanted to follow up on the 800 gig front, where you noted some.
Progress in terms of customer samples.
And realizing you are probably in pretty early stages, but are you at a point or when do you think.
Pending customer evaluation of these products is this something that could start to ship in calendar 'twenty four.
Yes.
Okay that was pretty clear and then I'll try again, then which is our further which as you know any any sense of timing on that within calendar 2000 and for that I think is about I think it's a little too early to say right now as you pointed out I mean, we're early stages on it I would say the demand picture for 800 G.
It looks pretty strong.
Certainly, having very constructive discussions with the customers, but how.
How long it will take in the qualification process and that is a little too early to say, but I do expect it to be in 2024.
Maybe sometime in Q2 Q3 next year.
They're usually quite a vacation you would take easily you know four to.
Six months ago loan group.
But the other thing that I wanted to emphasize these.
We are working very close with.
They are a big customer.
<unk> was 280, <unk> prolonged dull and <unk>.
D J.
In the EMEA would be best John to maybe ease from Q3 Q4 next year.
So it's only 800.
Nothing going on.
For the.
But they have been doing a phase of high speed transceiver attainment. He called the AI. The AIP made the immediate release Joel.
So we are <unk>.
Why don't you to fall under the body.
We say how do we get new body in sometime next year Q2, Q3, EBIT $1 60, we would we'd be we thought it would be done bought into in Q4 next year.
Got it and then let's stay on this topic for a second and Stephanie described for customers evaluating the products can you give us any indications of the type of customers those might be large cloud operators networking Oems what have you.
Most of the large cloud operators with.
That's at least one.
The OEM that supplies some of the large cloud operators. So it's all it's all cloud, it's all Hyperscale cloud related.
Whether it's whether it's directly or through.
An OEM that was supply and wouldn't be Gaye I called me.
Do you know what I'm talking about.
While there will always be fine there's no cooperate it bugs me that maybe you do become the number one.
Okay.
Customers in the world.
<unk> undertakes either.
Okay, Great and last one for me and maybe kind of related to that I mean.
Can you give us a sense.
<unk>.
And then I don't know whether its unit volumes are.
Revenue dollars, but.
How do you assess the kind of total opportunity for.
AI related we'd call it transceivers, our Aoc is and how has that.
Assessment of market opportunity evolve for you guys over the past quarter or so.
Oh Oh.
Both self crazy, Okay, while we further use.
Boy under the.
Oh, I'd say only applicable maybe.
Minimill.
Six to 8 million.
Volume.
Very good Asps.
<unk> 700, <unk> so against the opportunity next to you.
Thanks very much.
So is that $4 billion, probably next year.
And some people are you going to come out something you go to higher on varieties.
Yes.
I'll be very happy with food.
We are putting all results.
<unk>.
Hey, genius <unk> home with them.
This team.
Voting is coming up with you all.
<unk>.
<unk>.
And one on <unk>.
Yeah.
Therefore, we hope for all the customers.
Yeah.
Great. Thanks very much.
Well Nick the.
The next question is from Dave Kang with B Riley FBR. Please go ahead.
Thank you and good afternoon first question is on cable TV.
I use that by middle of next year, we should be expecting a pretty strong recovery. So are we talking about like.
Prior peak of like say 30.
You know a million or so per quarter is that what we should be expecting or not quite there yet.
I mean without putting a specific quarter on it yes, certainly the.
The expectation is that we can exceed.
The prior peak levels because at that point, we weren't really in <unk>.
Even an upgrade cycle right. It was just a sort of business as usual case as we move into an upgrade cycle, which is what we think will happen that portends the growth in DOCSIS 4.0, I would say the the opportunity there is significantly larger than.
Then the previous peak for sure not to mention the fact that because of the business model change and our asps are going to be higher.
Because we're not selling through.
Okay.
The middleman essentially.
And so not only will have higher unit demand, but asp's will be higher as well, but let me say that I always say by Q4 next year TV business you'd be OSA.
More than $40 million in Couponing C H.
<unk> gross margin.
140%.
Mm Hmm okay.
And then.
On the data data center 100 gig.
Little surprised why that was so strong because others are saying, it's really 800 gig.
Enjoying strong demand, whereas a 100 gig which is now I believe.
Considered to be part of AI.
100 gig is weak a weak so are you just gave.
Gaining market share and how should we be thinking about.
You know going forward should we be expecting 100 gig to be flatter and eventually.
Can you just talk about the next.
What do you expect over the next couple of years.
Sure. So I think in 100 gig, we're taking market share.
I think there's been some increase in.
Purchasing but maybe a couple of customers, but I think we're gaining market share there.
We've talked about some of the dynamics for example that.
Being a U S based manufacturer gives us some some advantages there in terms of being able to.
Attractive I would say more interest maybe than in the past relative to some of our competition in China.
And that's helpful for us in gaining this market share as far as how that plays out in the future I mean, I think look what we saw at 40 gig is that the older technology has a very long tail.
<unk> I mean, it's it lasts a long time and that's what I expect with 100 gig as well I mean I think that.
Eventually 100 gig will decline as 400 gig begins to grow but I don't think its going to be a dramatic I mean, I kind of I kind of feel like we tell the same story every time, there's a technology transition right Wall Street tends to think well one technology comes on and the other one goes away immediately and we always try to caution that no that's not what happens right.
Raj will shift.
The new technology tends to come on relatively quickly, but the old one tends to last a long time, because there's already a number of switches for example that are out there that havent been fully populated yet theyre going to fill out those ports and those switches.
Is that for a long period of I would say relatively flattish maybe down slightly but relatively flattish.
Demand.
I would caution not to not to remove 100 gig from the picture as quickly as you might be tempted to.
Got it and just wanted to clarify did you just say therefore regarding fourth quarter.
Similar revenue mix with the third quarter did I hear that right.
We're just saying that the data center portion of it would be.
Distant with Q3 right.
Okay.
You'll get some calls.
But the mix a little bit deeper to Gogo CE Mark multiple energy there.
Okay. Okay.
Yes, that's what I was after <unk> I'll just say it is.
Good morning.
But while you would go about.
Got it and my last question is regarding that that the termination.
Ed.
The P F.
There's who's responsible for that.
We believe that <unk> is responsible for the break up fee.
Pursuing them for payment on that.
Okay got it thank you.
What do you have a follow up question from Jeff coach with Raymond James. Please go ahead.
Yeah, just really quickly just wanted to talk about your thoughts on data center going into March is it.
Ridiculous to think that.
It can be up sequentially again.
Historically, that's not.
The strongest seasonally.
I mean, I think it's not ridiculous to think because again of the 400 gig business that we're talking about the new programs with Microsoft will be ramping during the quarter. So you are correct historically that ordinarily Q1 is sort of a.
A challenging quarter just seasonally.
A large part of that is because historically most of our datacenter products have been made in China and we do have.
Chinese new year at both in China, and Taiwan in this case, we're producing more of these products in Taiwan and even in the U S and so the impact of lunar new year should be less for us.
That in combination with the fact that.
Uh huh.
The 400 gig will be ramping in terms of production capacity.
Paints a pretty good picture in the March quarter for us.
Great. Thank you so much.
Okay.
At this time, we have no further questions.
I will turn the call over to the Doctor Thompson Lin Aoi's founder Chairman and CEO.
Closing remarks.
Okay and thank you for joining us today as always what we want to extend a thank you to our investors customers and employees.
We will continue to support we look forward to updating you on our next earning call.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Yes.