Q1 2025 Applied Optoelectronics Inc Earnings Call
David: [music].
Good afternoon, I will be your conference operator today.
At this time I would like to welcome everyone to applied Optoelectronics first quarter 'twenty 25 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.
You ask a question you May press Star then one on your telephone keypad.
To withdraw your question. Please press Star then two.
Please note this event is being recorded.
Speaker Change: I will now turn the call over to Lindsay Savarese Investor Relations for a Oh I must suffering you may begin.
Speaker Change: Thank you Andy salaries Investor Relations for applied Optoelectronics I'm pleased to welcome you to Aoi's first quarter 2025 financial results Conference call.
Speaker Change: After the market close today and why issued a press release announcing its first quarter 2025 financial results and provided its outlook for the second quarter of 2025.
Speaker Change: That release is also available on the company's website at Ao, Inc. Dot com.
Speaker Change: This call is being recorded in my past life, a link to the recording can be found on the Investor Relations section of the ally website and will be archived for one year.
Speaker Change: 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.
Stefan Murry: Thompson will give an overview of Aoi's Q1 results and Stefan will provide financial details and the outlook for the second quarter of 2025.
A question and answer session will follow our prepared remarks.
Stefan Murry: Before we begin I would like to remind you to review Aoi's Safe Harbor statement.
Stefan Murry: 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.
Stefan Murry: That activity performance or achievements of the company or its industry to differ materially from those expressed or implied in such forward looking statements.
Stefan Murry: In some cases, you can identify forward looking statements by terminology such as believes forecast anticipates estimates suggest intends predicts expects plans may should could would well potential or things or.
Stefan Murry: The negative of those terms or other similar expressions that convey uncertainty of future events or outcomes.
Stefan Murry: The company has based these forward looking statements on its current expectations assumptions 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.
Stefan Murry: All of which are beyond the company's control.
Stefan Murry: Forward looking statements also include statements regarding managements beliefs and expectations related to the expansion of the reach of its products into new markets and customer responses to its innovations as well as statements regarding the company's outlook for the second quarter of 2025.
Stefan Murry: Except as required by law, a oh I assumes no obligation to update these forward looking statements for any reason after the date of this earnings call to conform these statements to actual results or to changes in the company's expectations.
Stefan Murry: More information about other risks that may impact the company's business are set forth in the risk factors section of allies reports on file with the SEC, including the company's annual report on Form 10-K, and quarterly reports on Form 10-Q.
Stefan Murry: Also all financial results and other financial measures discussed today are on a non-GAAP basis, unless specifically noted otherwise non.
Stefan Murry: non-GAAP financial measures are not intended to be considered in isolation or as a substitute for results prepared in accordance with cat.
Stefan Murry: A reconciliation between our GAAP and non-GAAP measures as well as a discussion of why we present non-GAAP financial measures.
Stefan Murry: Put it in the Companys earnings press release that is available on <unk> website.
Stefan Murry: Before moving to the financial results I'd like to note that the date of Aoi's second quarter 2025 earnings call is currently scheduled for August seven 2025.
Speaker Change: Now I would like to turn the call over to Dr. Thompson Lin Aoi's.
Thompson Lin: <unk> founder Chairman and CEO Thompson.
Speaker Change: Thank you Lindsay and thank you for joining our call today, we are pleased to be either fourth quarter or the jobs.
Well you know it better.
Speaker Change: Better than our expectations, we continue to see strong demand in the CATV market and achieve the highest quarterly via television.
Speaker Change: In <unk>.
Speaker Change: During the fourth quarter.
Speaker Change: Florida, we can deal with Meg properties allow data after the beaches.
Speaker Change: These aren't we.
Speaker Change: I was scared after the June.
Speaker Change: During the quarter.
Speaker Change: During the fourth quarter, we can do about 99 $9 million.
Speaker Change: What is not.
Speaker Change: The age of $94 million.
Speaker Change: $104 million.
Speaker Change: We recorded non-GAAP gross margin so depo.
Speaker Change: I wanted him to say.
Speaker Change: What's the ball.
Speaker Change: And although I guess, rich 20, United saying too.
Speaker Change: It was 34, 5% all on cat loss shares.
Speaker Change: It was in <unk>.
Speaker Change: I'll bet as rich of a loss.
Speaker Change: To breakeven.
Speaker Change: Total revenue for death, and the port outs, Oh, sorry, $2 million increase.
Speaker Change: 7% year over year.
Speaker Change: But what's so 20% sequentially due to inventory digestion.
Speaker Change: On one product by.
Speaker Change: One of our customers during the quarter, we began several new clarification Dave.
Speaker Change: Once the poll.
Speaker Change: Quite a vacation.
Speaker Change: Did you put out.
Speaker Change: Yes.
Speaker Change: Our hyper scale customers.
Speaker Change: Hello, Bloomy C a T.
Speaker Change: Have you said it was.
Speaker Change: It was $64 million.
Speaker Change: Which increased more than six times year over ear.
Speaker Change: It increased 24% sequentially.
Shimon: I continue Shimon.
Speaker Change: Nick.
Speaker Change: It provides.
Speaker Change: Well one of our major missile person.
Speaker Change: As we have discussed.
Speaker Change: All prior earning calls.
Speaker Change: And there's no customers.
Speaker Change: All in the process of upgrading.
Speaker Change: The old site for new rules, so that they can support.
Speaker Change: In the near term.
Speaker Change: The Russian eventually enable dosing football doodle.
Stephen: With that I'll turn the call I'll go to Stephen to review the details of our Q1 performance.
Steffen: Alright, Thank you Steffen.
Speaker Change: Thank you Tom.
Speaker Change: We're pleased to deliver results that were in line or better than our expectations in the first quarter we.
Speaker Change: We started the year with a considerable momentum compared to Q1 of last year, our revenue more than doubled and we expanded our gross margin by over 1000 basis points.
Speaker Change: We also generated positive non-GAAP EBITDA in the quarter.
Speaker Change: We continued to see strong demand in the CATV market and achieved the highest quarterly CATV revenue in <unk> history during the first quarter.
Speaker Change: Further we continued to make progress on our data center business with three new design wins with an existing Hyperscale data center customer during the quarter.
Speaker Change: Looking ahead, we continue to believe that these positive long term growth trends in both our CATV and data center markets will benefit our business.
Speaker Change: While we continue to closely monitor news of terrorists in Q1 terrorists had no material impact on our financials.
Speaker Change: We do not expect significant impact in Q2 based on what we know at this point.
Speaker Change: We are maintaining a posture of flexibility and vigilance.
Speaker Change: Continuously assessing our supply chain and manufacturing operations with an eye towards minimizing tariff impacts.
Speaker Change: At OFC, we unveiled our near term targets for adding production capacity for 800 G at higher Transceivers at our existing plant in Texas.
Speaker Change: I am pleased to report that we remain on track for these targets, which will culminate later this year with what we believe will be the largest domestic production capacity expected to be approximately 40000 transceivers per month, roughly 40% of our overall capacity for these advanced 800 G optical transceivers.
Speaker Change: By mid 2026, we expect to be able to produce over 200000 pieces per month with.
Speaker Change: With the majority produced in Texas.
Speaker Change: Currently we have already begun to order the equipment necessary to bring up production of our 800 G. At our current facility outside of Houston.
Speaker Change: And initial production capacity is on track to be shipping product later this summer.
Speaker Change: We believe that are largely in house developed production automation capabilities uniquely position us to be able to rapidly scale manufacturing in the U S.
Speaker Change: And we remain committed to offering our customers the option to purchase these products onshore.
Speaker Change: In addition, while we do utilize some imported components in our Transceivers.
Speaker Change: Key components like our laser chips are already manufactured in the U S.
Speaker Change: Importantly, in our 800 G. At 1.6, terabyte transceiver design less than 10% of the value of the components used is currently sourced from China.
Speaker Change: And we have a pathway as we scale production to further reducing this china content ultimately to near zero.
Speaker Change: We are also in discussion with several key suppliers about onshoring their production to the U S to support a robust domestic supply chain.
Speaker Change: Our customers have indicated their need for reliable domestic manufacturer of next generation optics, and we continued to receive very positive feedback from them regarding their plans.
Speaker Change: As Thompson mentioned earlier.
Speaker Change: Our Q1 highlights include delivering revenue of $99 $9 million, which was in line with our guidance range of $94 million to $104 million.
Speaker Change: non-GAAP gross margin of 37%, which was above our guidance range of 29% to 35%.
Speaker Change: And lastly, our non-GAAP loss per share of <unk> was within our guidance range of a loss of seven cents to breakeven.
Speaker Change: During the first quarter, we continued to deliver on our initiatives that we had previously laid out.
Speaker Change: We continue to believe that the long term demand drivers for our datacenter business are strong as our customers continue to build out their next generation AI focused data center architectures.
Speaker Change: We believe that we are uniquely positioned to benefit from these tailwind and our efforts are centered on fulfilling our customers' needs with high quality and speed.
Speaker Change: In our datacenter business on the back of the announcement, we made with Amazon in mid March we.
Speaker Change: We're working diligently to deliver the products, which they are going to need to be qualified in their data center.
Speaker Change: We continue to expand the depth and breadth of our interactions with Amazon as we mutually look to expand revenue opportunities for ally to reach the $400 million or more annually that will take to fully earn the warrants that we agreed to in March.
Speaker Change: We saw impressive turnout at the OFC trade show, where we continue to engage in meaningful dialogue with our customers, particularly with some of our larger hyperscale customers and demonstrated our next generation technology, including C. P O.
Speaker Change: Further we received positive feedback from our 800 G at 1.6 terabyte product demos.
Speaker Change: We are active in building out our capacity to address 400, G and 800 G product demand, which I will touch on further in a moment.
Speaker Change: And we are seeing a growing demand for both of these products.
Speaker Change: In Q1 demand for certain 100 G products unexpectedly surged in the quarter.
Speaker Change: Which we believe may be related to tariff concerns.
Speaker Change: Our production capacity on these 100 G products was limited by supply constraints as we worked to meet this increased demand.
Speaker Change: We are working with our supplier on these parts and expect a partial recovery in Q2, and a full recovery by Q3, which will be positive for both our revenue and gross margin.
Speaker Change: We continue to make progress on customer qualifications on our 800 G products and are being asked by several customers to expedite production earlier than previously requested.
Speaker Change: Especially as we expect to bring U S production online in Q3 of this year.
Speaker Change: This demand pull and continues to increase our confidence in our second half 2025 ramp for 800 G.
Speaker Change: While immaterial to our overall revenue we did record some revenue for our 800 G products in the first quarter related to deliveries for customer qualification activity.
Speaker Change: Turning to our CATV business as Thompson mentioned after receiving a substantial order for a quantum bandwidth networking products from a top north American cable operator last quarter.
Speaker Change: Product shipments have begun to ramp we are.
Speaker Change: Were currently being deployed in multiple geographic markets by a major North American Msos.
Speaker Change: And new markets are being added regularly as technicians are trained and products are staged for deployment.
Speaker Change: Our Motorola housing style amplifier products are slated for full qualification and field trial. This month and forecasts for delivery of these products began in June.
Speaker Change: This nearly doubles our available market from what we're currently seeing on only gain maker sty only amplifiers.
Speaker Change: In Q2, we are balancing production to ensure we have sufficient stock of both types of amplifiers in the U S by late June.
Speaker Change: Lastly, during the quarter, we expanded our production capacity to further diversify our manufacturing capabilities and to add additional resilience to our business model.
Speaker Change: As a reminder, we currently have three manufacturing sites one here in sugar land, Texas, where our headquarters is one in Ningbo, China and one in Taipei, Taiwan.
Speaker Change: As we mentioned on our last earnings call, we have been retrofitting our facility in sugar land, Texas to accommodate new automated production equipment, which we plan to receive beginning in June.
Speaker Change: This equipment will be used for the production of both 800 G and one six terabits transceiver products, which we expect will be produced and delivered from sugar land. Beginning later this summer.
Speaker Change: During the fourth quarter as I mentioned on our last call. We signed an agreement to lease an additional building in Taiwan, which we began outfitting in Q1 in order to increase production of our 100 G 400, G and 800 G datacenter transceivers.
C. A T V products there.
Speaker Change: As you May have heard me say at OFC, we expect to increase production in both our U S and Taiwan locations by eating and a half times by the end of the year.
Speaker Change: And we are dedicated to achieving this goal we have already begun ordering equipment to enable this ramp.
Speaker Change: Turning to our first quarter results, our total revenue was $99 $9 million, which more than doubled year over year and was essentially flat sequentially off a strong Q4 and was in line with our guidance range of $94 million to $104 million.
Speaker Change: During the first quarter, 65% of revenue from CATV products.
Speaker Change: 32% was from datacenter products with the remaining 3% from F T Th telecom and other.
Speaker Change: And our data center business Q1 revenue came in at $32 million, which was up 11% year over year and was down 28% sequentially.
Speaker Change: The sequential decrease was due to seasonality as well as inventory digestion from one of our largest hyperscale customers.
Speaker Change: Also as I mentioned above demand for some of our legacy 100 G products surged in the quarter, but supply constraints on one of the components used prevented us from fully delivering on this demand and we are working to rectify the supply constraint as we move into Q2 and beyond.
Speaker Change: Looking ahead to Q2, we expect the sequential increase in our data center revenue.
Speaker Change: In the first quarter, 78% of datacenter revenue was from 100 G products.
Speaker Change: 10% was from 204 hundred G transceiver products.
Speaker Change: And 10% from 40 G Trust your products.
Speaker Change: And our CATV business CATV revenue in the first quarter was $64 $5 million, which was up more than six times year over year and increased 24% sequentially.
Speaker Change: This significant increase is due to the continued ramp in orders for our one eight gigahertz amplifier products.
Speaker Change: In Q1, you were essentially at our manufacturing capacity for <unk> TV production.
Speaker Change: Current production equipment and staffing.
Speaker Change: But we believe that our current capacity approximates demand from our customer base.
Speaker Change: Looking ahead to Q2, we expect a modest pullback in CATV revenue as we retool production to our Motorola style amplifier products.
Speaker Change: Now turning to our telecom segment revenue from our telecom products of $2 $9 million was up 29% year over year and down 17% sequentially.
Speaker Change: Looking ahead, we continue to expect telecom sales to fluctuate from quarter to quarter.
Speaker Change: For the first quarter, our top 10 customers represented 97% of revenue up from 92% in Q1 of last year.
Speaker Change: We had two greater than 10% customers one in the CATV market, which contributed 64% of total revenue.
Speaker Change: And one in the data center market, which contributed 27% of total revenue.
Speaker Change: In Q1, we generated non-GAAP gross margin of 37%, which was above our guidance range of 29% to 35%.
Speaker Change: And was up from 28, 9% in Q4 of 2024.
Speaker Change: And 18, 9% in Q1 of 2024.
Speaker Change: The increase in our gross margin was driven primarily by a favorable product mix, including growth in our CATV revenue.
Speaker Change: Looking ahead, we continue to expect that our gross margin will improve further as we see the impact of manufacturing efficiencies in our CATV production and improving product mix.
Speaker Change: We remain committed to our long term goal of returning our non-GAAP gross margin to around 40% and continued to believe that this goal is achievable.
Speaker Change: Total non-GAAP operating expenses in the first quarter were $35 $5 million or 36% of revenue, which compared to $24 $8 million or 61% of revenue in Q1 of the prior year, primarily due to increases in R&D and G&A being driven by increased business activity.
Speaker Change: Looking ahead, we expect non-GAAP operating expenses to be in the range of $36 million to $40 million per quarter.
Speaker Change: non-GAAP operating loss in the first quarter was $4 $8 million compared to an operating loss of $17 $1 million in Q1 of the prior year.
Speaker Change: GAAP net loss for Q1 was $9 $2 million or a loss of 18 cents per basic share compared with a GAAP net loss of $23 $2 million or loss of <unk> 60 per basic share in Q1 of 2024.
Speaker Change: On a non-GAAP basis net loss for Q1 was zero point $9 million or <unk> <unk> per share, which compares to our guidance range of a loss of $3 $6 million to breakeven or a loss per share in the range of seven <unk> to breakeven per basic share.
Speaker Change: This compares to a non-GAAP net loss of $12 million or <unk> 31 cents per basic share in Q1 of the prior year.
Speaker Change: The basic shares outstanding used for computing the earnings per share in Q1 with 58 million.
Speaker Change: For the full year, we expect to generate positive non-GAAP net income.
Speaker Change: Turning now to the balance sheet. We ended the first quarter was $66 $8 million in total cash cash equivalents short term investments and restricted cash. This compares with $79 $1 million at the end of the fourth quarter of 2024.
Speaker Change: We ended the quarter with total debt, excluding convertible debt of $46 $1 million compared to $46 million at the end of last quarter.
Speaker Change: As of March 31, we had $102 $3 million in inventory, which compared to $88 $1 million at the end of Q4.
Speaker Change: The increase in inventory is primarily for raw materials needed for production of both C. A T D and datacenter products.
Speaker Change: As we disclosed in February we initiated a new at the market offering today.
Speaker Change: To date, we have raised $98 million net of commissions and fees under this new program.
Speaker Change: We intend to use these proceeds to continue to make investments in the business, including new equipment and machinery for production and research and development use including the earlier mentioned production expansion in Texas.
Speaker Change: We made a total of $35 million in capital investments in the first quarter, which was mainly used for manufacturing capacity expansion for our 400 G and 800 G transceiver products.
Speaker Change: On our last earnings call, we discussed our plans to make sizable capex investments over the next several quarters as we prepare for increased 400 G 800, G and one six terabits datacenter product production in 2025.
Speaker Change: For the year, we continue to expect between $120 million and $150 million in total capex.
Speaker Change: These costs could be impacted from the tariffs given the evolving nature. It is difficult to predict what type of impact or by how much.
Speaker Change: We will continue to do our best to minimize any impacts.
Speaker Change: In any event, it's clear to us that U S. Based production is top of mind for our customers and we remain committed to building out this capacity with production expected to start later this summer.
Speaker Change: Moving now to our Q2 outlook.
Speaker Change: We expect Q2 revenue to be between $100 million and $110 million accounting for a modest sequential decrease in CATV revenue and sequential increase in data center revenue.
Speaker Change: We expect non-GAAP gross margin to be in the range of 29, 25% to 31% non.
Speaker Change: non-GAAP net income is expected to be in the range of a loss of $4 $8 million to a loss of $1 7 million and non-GAAP earnings per share between a loss of nine cents per share and a loss of <unk> <unk> per share using a weighted average basic share count of approximately $55 7 million shares.
Speaker Change: With that I will turn it back over to the operator for the Q&A session operator.
Speaker Change: We will now begin the question and answer session.
Speaker Change: I'll ask a question you May press Star then one on your telephone keypad.
Speaker Change: If you are using a speakerphone please pick up your handset before pressing the keys.
Speaker Change: To withdraw your question. Please press Star then two.
Speaker Change: At this time, we will pause momentarily to assemble the roster.
Speaker Change: And our first question comes from Simon Leopold of Raymond James. Please go ahead.
Simon Leopold: Thanks for taking the question I first wanted to ask about.
Speaker Change: Your understanding of.
The channel inventory for your cable TV products in other words do you have some telemetry features that allow you to know when products are deployed versus sitting in a warehouse I just trying to understand what's the risk or the knowledge of the status of the gear you you've shipped.
Speaker Change: And then I've got a follow up.
Speaker Change: Yeah. We are we don't I mean, we do have telemetry features that in principle could allow us to have access to that but.
Speaker Change: We have a more direct way of knowing when we get reports from the DSO involved.
Speaker Change: And from our channel partner.
Speaker Change: Does that account for that inventory. So we've got pretty good knowledge of where that inventory is at a higher level than we would normally expect.
Speaker Change: Given the evolving tariff situation, that's beneficial for us to have as much inventory as we can state side.
Speaker Change: In anticipation of.
Speaker Change: The revenue ramp that we're seeing.
Speaker Change: So it's an intentional inventory build up there, but we definitely have insight into what level that is and what the future holds for that.
Speaker Change: And so let me just make sure. This is clear you're you're you're saying that there is a bit of an inventory build because of the tariff situation, but you're comfortable with your knowledge of that inventory level.
Speaker Change: Yes, exactly we we know what the inventory level is we know how much is coming out how much is going in.
Speaker Change: Where the demand is going we've nowhere within the Msos network you know those products are being deployed.
Speaker Change: Okay, Great and then on the 800.
Speaker Change: Great.
Speaker Change: Sorry go ahead.
Speaker Change: So the we already as we said we have received a voting button and it makes it all and loved it but you can consume.
Speaker Change: So all of the lending even Tony we have now.
Speaker Change: She'd be complete couldn't buy I always say.
Speaker Change: Some time in Q3, so maybe August.
Speaker Change: So it's not all your inventory.
Speaker Change: Okay.
Speaker Change: The agreement those views based on the customer demand.
Speaker Change: One of the biggest that may slow U S.
Speaker Change: Okay, and then on the the progress with with 800 gig.
Speaker Change: It sounds like Youre still in kind of be the qualification modest modest revenue in the first half of the year with the ramp in the second half could you help us think about how to how to quantify or model what that second half 800 gig contribution should be.
Speaker Change: Well as we noted earlier by the end of the year, we expect to have a capacity about 100000.
Speaker Change: Pieces, a month of either 800 gig at one six terabits. The majority of that the vast majority of that for us is likely to be 800 gig.
Speaker Change: So you'll see a ramp from near zero now too you know something like that level by the end of the year.
Speaker Change: But.
Speaker Change: I guess rough math.
Speaker Change: Yes.
Speaker Change: 75 cents, a gig that would be well over 100 million in a quarter of $100 million in the quarter My mic doing something wrong in that thinking.
Speaker Change: Yeah, so that'll be that production capacity that'll lag obviously, the deliveries will lag, maybe a quarter or something like that on that because we have some cycle time for for actual deliveries, but you'll see a ramp again in the second half year up to that level.
Speaker Change: Great. Thank you very much and then maybe one last one if I may.
Speaker Change: Are you manufacturing anything in China that gets shipped to the U S. Today any color on that thanks.
Speaker Change: So.
Speaker Change: Uh huh.
Speaker Change: We're not manufacturing any products that have a country of origin, China four for tariff purposes, we do certain manufacturing operations there but.
Speaker Change: But the ultimate country of origin is not China.
Speaker Change: Thank you.
Speaker Change: Well.
Speaker Change: Once again, if you would like to ask a question. Please press Star then one.
Speaker Change: And our next question comes from Michael Genovese of Rosenblatt Securities. Please go ahead.
Michael Genovese: Oh great.
Speaker Change: Thanks very much.
Speaker Change: I guess my question on cable T V will be can you flesh out.
Speaker Change: Retooling to Motorola style.
Speaker Change: Amplifiers.
Speaker Change: So we can understand that a little bit better.
Speaker Change: I'm, sorry, I didn't quite understand your question and said can you flesh out the tooling I'm not sure what you're asking.
Speaker Change: Yeah, yeah, yeah. What that meant? Yeah, sure. So it just means that so we've produced a significant amount of product for the game maker platform.
Thompson Lin: As Thompson mentioned, that will be consumed pretty quickly, but we have a sufficient inventory
Thompson Lin: During this quarter, during Q2, we're shifting our production to primarily the Motorola style which as I noted in our prepared remarks earlier, we're expecting the final field trial and qualification really imminently in the next few weeks.
Thompson Lin: So then we'll ship that product out, so that way we'll have, you know, significant inventory of both products state-fied by the end of June .
Speaker Change: You know, for those that would kind of push back and say,
Thompson Lin: By the time you have volume of 800G in the second half of the year, others in the industry will be, you know, moving on to focus on 1.6 and, you know, sort of why or why not, you know, that you're intersecting the market in a good place where it's going to grow for for some time rather than coming in, you know, too late.
Speaker Change: Can we get your view and the data that you're looking at on the kind of long-term 800G market from the time you enter for several years forward, what you think the market's going to look like?
Speaker Change: The market is enormous for 800 gig and it's going to continue to grow based on what we're hearing from our customers.
Speaker Change: One point six therapists is, you know, a product that is starting to come out now and will ramp as well, but that doesn't take away from the growth prospects that we're seeing in hearing from our customers for eight energy.
Let me emphasize, do you remember we just signed?
Speaker Change: The deal was Amazon. And as we say, it's about maybe our beliefs, much more than 4 billion dollars in the next 10 years. The main focus, A 100 GE for sure, we have some 400 Zeppelin is to, from Q3, the environment picture, and then go to 1.60.
for 1.6T, another only big version.
Speaker Change: We believe it's only for Nvidia. Maybe later on from Google, that's it. But not for the customer we have. But the customer we have right now.
They are not really buying 1.6 kg transceiver.
Speaker Change: and then finally for me, thanks for that. Finally for me is just...
Speaker Change: Well, we announced just a moment ago that we substantially completed the ATM, 98 million net of fees, so that's basically the 100 million gross. We haven't announced plans for any other future fundraising, so...
Casino, M. Kodori, Casino, Potential, S.H.I.P. investment. [inaudible]
Speaker Change: I don't know if we are looking for some other solution.
for Irving and Needle.
Speaker Change: Funded, but as we said we believe, which they believe will be profit about the years.
and you will see that we have delivered the process every time.
So, Operation Catch Throw
Chibi Thorpey
So, I would say you need to rest money, that's for good.
Thank you very much.
Speaker Change: for the Stonkey Van Brown department, especially with our Edmonton. We still believe we're becoming...
Speaker Change: Dave, me just a prior, I would say maybe I was in one year, 400 year and higher.
Speaker Change: and that's why there's nothing going on but quality is still a key issue.
So that's why, you know, I think it was AI demand.
Speaker Change: We need to go through step-by-step, but right now, I think so far so good, we have a composite.
Okay, perfect. Thank you. I will pass it on.
Tim Sabineau: The next question comes from Tim Savageaux of Northland Capital Markets. Please go ahead.
Tim Sabineau: Hey, good afternoon. Looking at what you have discussed at OFC in terms of capacity additions.
Looks like he's got some additions planned.
Tim Sabineau: They talked about 400 gig earlier in there, but 800 gig in Taiwan here in May and June . Now, would you expect to be able to deliver material 800 gig revenue in Q3, and I guess by material, I mean, say tens of millions?
Tim Sabineau: Well, I mean, I will comment on the exact magnitude, but it's certainly material revenue for made-undergaining Q3S.
Great.
Thank you.
Tim Sabineau: You know, and obviously relative to what you announced in the Warren Agreement.
I mean, that's that capacity that you're ramping to would...
Major Cloud Provider Customers in the
Speaker Change: Specifically, whether the design wins, you mentioned in the quarter, should we assume that that's with Amazon or with other potential customers? So, design wins none of them with Amazon.
in this quarter. They were with other hyperchael customers.
and I mean to kind of get at your question.
Speaker Change: More directly. What I think you're asking is, do we think we have significant opportunities with other hyperscale customers? The answer is absolutely yes. I mean, we've had very productive discussions with
Speaker Change: You know, other customers, other data center customers, hyperscale customers, besides Amazon, we think that, you know, the uncertainty around tariffs.
gives the U.S. based production that we're adding.
Speaker Change: and Advantage. I mean, I think, you know, all of the hyperscalers that we've talked to have been very excited about the prospect of being able to purchase.
You know, at least a portion of their supply.
Speaker Change: from a domestic supplier. Just for continuity sake, for security of supply chain, we already make the laser sear, they like the idea that we can assemble transceiver sear as well. And now, if they'll end both sides, it's the PAA.
Speaker Change: That is Luik Kwanman, it is a view of Tunpinis with U.S. Kwanman.
So, whippity white noise.
Speaker Change: Required to be made actually either in Taiwan or in...
Houston, and that's another key.
A special for a high-end agency, the product for A.I.
Speaker Change: They got it and going back to the design ones, I think you mentioned there were three with one existing hyperscale customer. Can you say whether those are 800 gig design ones?
None of Murry's had a gig.
Okay.
Speaker Change: We have several other co-evaluation with the several hybrid skaters and so on. Let me say that. Right now, when we see the design, we will go through like the three phase. So right now...
Speaker Change: For some purpose, some cuts we are doing in the final phase. That's the misunity of a line or something like that.
Speaker Change: You just recall, then you start locating to the body in delivery, but for the lab qualification, we have passed already. So we are
Speaker Change: A few St. McCawson Rice Interpreter that we are in the final.
Speaker Change: Quite by case in phase, or you can say the final phase, okay?
Speaker Change: So, which is why we talked about having some revenue, you know, not big material revenue, but some revenue for 800g in the quarter. Yeah, yes. No, but you're not so penal, basically, like maybe $5,000 piece or 10,000 piece, okay? So, it's not like $1,200 piece, okay?
Speaker Change: Got it. And Stefan, you kind of alluded to it, but...
My last question was going to be in the next video.
You know, I guess around what sort of share?
You think that agreement?
at Amazon Gives You Relative.
Consumption
Well, I think it's time to mention a few moments ago.
Speaker Change: I don't see the reason why we couldn't be there, and that would imply a market share, you know, typically they're going to have two or three suppliers, so that would be, you know, maybe 30, maybe even up to 40%.
Speaker Change: That's why I said we are much more competent. I can't say 100%. What's the noise?
Speaker Change: I believe it's more than 90% or 95% who are become the major suppliers for Amazon, including others.
We see now is by Simon Leopold, next year, Q2, Q3, I will say more than 40% of my share.
Great, thanks very much.
Speaker Change: The next question comes from Dave Kang of Be Rally SBR. Please go ahead.
Dave Kang: Thank you, good afternoon. First question is regarding the inventory digestion situation. Just wondering if that was a 400 gig and do you expect that to recover in the second quarter or how long will that go on?
Speaker Change: Yes, it was 400 gig, and yes, we expected to largely resolve in a second there.
Speaker Change: Got it. And then I'm just on the margin situation. What's the margin differential between cable TV and data sensor transceivers? And is there any difference between 400 gig and maybe 80 gig when you start to ship next quarter?
[inaudible]
Thank you very much.
Speaker Change: I'm sorry, your first question is about the margin difference between...
Yeah, tables EV and transceivers.
Speaker Change: The margin on cable is somewhat higher. It varies a little bit based on product mix within the data center market.
Speaker Change: The cable market, relatively speaking, has a lot less product diversity in there. There's just a few products versus data center which has a lot more. So the mix affects the data center overall margin a little bit more, but it's anywhere from I would say.
I don't know, 300 [inaudible]
Speaker Change: 400 basis points to maybe 600 basis points higher for cable right now and we expect the cable will expand.
Speaker Change: as we continue to ring efficiencies out of our manufacturing process.
Speaker Change: Data Center will expand. The margin there will expand based on somewhat on economies of scale, but more likely on, you know, the transition to 800 gig and eventually 1.6
Got it, and then I'm just from the ...
Speaker Change: regarding your 800 gig qualification status. Can you just remind us how many you got going and sounds like they've been going on for a while, right? I mean, at least at the last summer. So, maybe...
Speaker Change: I don't know, eight, nine months. Is that kind of a typical process? And in your prepare remarks, you talk about you got some new qualifications. So, should we expect similar eight to nine months, or any thoughts on that?
I think
Speaker Change: The number of calls can't have the exact number in hand but it's it's
Speaker Change: More than five less than 10, I would say somewhere in that range, I'd have to get the exact number for you. As Thompson mentioned, you know, it's a multi-stage process.
Speaker Change: We're pretty strict about when we qualify a design win or when we report a design win and it requires...
Full Qualification, an order from the customer.
Speaker Change: and a forecast that continued orders will be ongoing, right?
Speaker Change: You know, we're feeling very, very good about the progress that we're making with the customers on 800 gig. It's going quite well. Now, you just reface, the first one is called third party, all right?
Speaker Change: We passed then and then the then the customer we had some kind of much bigger volume of in-house into our ability.
Speaker Change: Publication, I will test some of them already. As I said, the last one is you need 55,000 or even 10,000, 20,000 translators do it with the final phase of publication in a data center for at least one month and make sure
Almost won't pay you.
Okay.
Speaker Change: Because, as I said, right now with AI, the requirement for quality is really, really high, much higher than that two, three goal for the transceiver.
Speaker Change: And my last question is, you know, you talked about Texas versus Taiwan, Conceivers coming out of Texas versus those from Taiwan. What do you think the margin differential will be?
Thank you.
It could be a law of course, you know, made a picture in Houston.
Speaker Change: So you beat the demo and qualified in Nepal and in Taiwan.
In this quarter, U.S. was sometime in Q3. [inaudible]
Got it. Thank you.
Speaker Change: At this time, we have no further questions, but I will turn the call over to Dr. Thompson and lend for any closing remarks.
Speaker Change: Okay, and Simon Leopold, you are now today, as always, we want to extend a thank you to our investors, customers and employees.
Speaker Change: For our business, we made our boss, and we are unique, positioned to provide value from this opportunity. We look forward to seeing many of you at Accompanied Investments. Thank you.
Speaker Change: [music].