AAOI - Earnings call transcript Q1 2020 | Applied Optoelectronics, Inc.

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Operator

Good afternoon. I will be your conference operator. And at this time, I would like to welcome everyone to Applied Optoelectronics First Quarter 2020 Earnings Conference Call. [Operator Instructions]

I would now like to turn the call over to Monica Gould, Investor Relations for AOI. Ms. begin. may you Gould,

Monica Gould

today, to Monica provided to release Relations first welcome call conference the the XXXX market financial company's live. I'm announcing ao-inc.com. press and first outlook its quarter applied This is for second I'm on recorded Relations on A can the quarter results quarter will year. website closed section the AOI recording available archived After pleased link of you results call. be issued found Gould, you. a of is for release and also Investor for one financial XXXX. website webcast Optoelectronics, being The XXXX be and Investor AOI its at Thank to AOI's and the the

Lin, an today's Chairman session will and AOI's Chief second question-and-answer Financial Stefan remarks. will Joining call Founder, outlook for A and Stefan Officer. Thompson follow quarter Strategy overview details provide give Chief the of financial Dr. is Thompson Murray, XXXX. AOI's Dr. prepared on will our of Officer AOI's and CEO; the and results, us QX and

cases, forward-looking similar or uncertainty you from will may, those by that identify by could, plans, some intends, forward-looking such On to call, we harbor such or results future differ and current events other can and I cause safe company's anticipates, should, In to in management could involve the statement. thinks estimates, as expects, and forward-looking outcomes. These materially Before actual of review to convey well begin, will predicts, anticipated statements. AOI's forward-looking you remind as assumptions terminology statements statements like would make risks expressions statements. believes, would, as today's uncertainties expectations, which

to the as of expansion required statements Forward-looking statements actual responses management's products outlook Except markets no for company's XXXX. as the date into to to also conform new of update statements we and any changes or earnings the results second and assume the the these beliefs to this in obligation customer innovations to statements regarding by quarter regarding our the law, as expectations. for call company's after of related reach to forward-looking of reason our well expectations include statements

noted may information our other between in of in exception discussed not financials XXXX. why the press business website. year of release specifically as today that the are XX, otherwise. the or annual on our included company's about basis, non-GAAP to More file considered GAAP company's measures Also, risks with are intended discussion GAAP. with with the non-GAAP in XX-K that Form non-GAAP available set our and A the the Non-GAAP report a is prepared as the impact all a financial including reports well Factors are substitute present financial December forth unless results SEC, as measures are for on on be the a revenue, section measures, accordance we on in isolation reconciliation earnings Risk company's ended of for

like We live XXth I'd to with webcast section Cross Stifel at AOI Relations virtually Insight discussions be of the management June opportunity Media the at present the results, interact on Annual Sector to to Investor and the financial of XX. the These announce will Conference and available hope will the you be many virtually. website. the on to Cowen Conference webcast have links AOI to Telecom moving Before XX May and that on Technology will

like of I'd the scheduled August to quarter for earnings currently XXXX second that Additionally, call our XXXX. note date is X,

Founder, Dr. Thompson call Chairman the Applied Thompson? Lin, turn to CEO. like would I and to Optoelectronics' Now over

Thompson Lin

for Thank everyone, for today us you, Monica, joining you, and our. thank

customers our come thank together AOI other entire through these the would has who team support I crises. First, and to each

we Our individuals out are to the those our this first responders thoughts communities, from are who you. virus protecting and the go who world thank around suffering all

our taken while ensure have support employees numerous needs. We actions to customers' the of well-being and to continuing safety our

positiver around to factory we the and back conditions. normal use no the working I operations, virus. requesting gathering. report for of on AOI in safeguards far in protective base more to testing measures optimal employees recommendations agreement, adopting and a maintain world limitation face are to offices and mandatory mask increase that please available, employee other Our personal include These am generally and our so were employees meeting working of testing are the

safety part. further continue of the with our enforce requirements of the we which for and society However, employees to larger new will are we

quarter. due primarily the our COVID-XX range Taiwan QX of out of million, guidance $XX.X due to AOI below to revenue to expected pandemic. delivered and was Turning delays China shipping which

and per the result, $X.XX the these associated with margin we pushed was coronavirus. China during below due a loss a net associated from shipments $X.X expense our certain range, was As shipments and QX. with Taiwan approximately share, XX.X% million expected have increased and quarter AOI of delivered non-GAAP gross delayed non-GAAP guidance which of to into

in than and expecting. on the impact which the resulted challenge initially we in factory we measures of with during the to As discussed, are our higher shutdown increase our QX in and order earnings QX on in Taiwan costs our production to call, reduce customers U.S.,

changing the pandemic will QX crisis in currently environment QX. has go we significant fared be worked remain operations team entire digitally due And the will to but regulatory on impact Given COVID-XX and early uncertainty, track. most due the to that from our believe this back of

and XX% our range. improve of QX almost guidance our midpoint of revenue expect specially the We to at result

from into encouraged increased fourth activities the XG-related and China demand began diverse that continuing by in set improving a in data and are of quarter is center We customers QX.

weeks. all-time design total conditions we and the is pandemic. win to last previous During up This had in year of the -- experience during all -- weeks work of the increases the quarter. due loading This prior quarter, began QX of notable the quarter, the the in weeks achievement and to the record XX an XX breaker of from nine more

our demand the products. of same total increased that QX a for Additional, for year-over-year pleased quarter sales saw XXXG period year, in the we QX, first products marking, XXXG we of are XXXX. from X% XXXG since to In increased growth report revenue

During This the and prioritized balance revenue the QX. we first from quarter, customer in the achievement our -- to shutdown of returning China. due given CATV after demand out in fill the reduced

will the However, improve we the seen have the to course forecast companies. of CATV believe improving year. we segment continue CATV over from some And already that

CATV growth relationship during Networks new later ATX a quarter, the in which the year. segment in finalized the also the is with catalyst We for

will to details to our over you I call the review in QX that, With performance turn Stefan. the Stefan of our do

Stefan Murry

COVID-XX crisis how responded I'd you, to proactively current Thank AOI has address to first Thompson. the and and the environment. adapted like

protect of Given possible and the to our presence in virus took of indications we action impact the workforce than China, globally in many the had companies earlier our early U.S.

We have our in on employees to adopted conditions for and working CDC recommendations track. and keep safe safeguards factories our the and maintain our from offices manufacturing capabilities

we operating we back we operations While believe in China normal capacity. QX, factory during our disruptions to are largely in had significant

home, significant capacity needs. rise which heightened working customers from they center in to the coronavirus employees work as has a number our demand led The network from increased resulted we data in meet to believe has of the

this has crisis. Our been customers our working support to team through tirelessly

to QX, revenue low and at ahead we improvement XX% the range. mid-XX% our margins guidance midpoint the growth of gross sequential nearly Looking expecting in an our range are to to

guidance was our million, range. Turning first the which was quarterly performance. below quarter our to $XX.X Total revenue for

there, financial shifting locations unanticipated QX the China Our of performance factory Taiwan. costs and impacted cost and delays coronavirus shipping out of of and China higher was to to Taiwan higher COVID-XX the our due the manufacturing result by in a prices the shutdown as during U.S. pandemic

China. pandemic cost pushed due slowdown for reductions certain work we Additionally, QX planned had a out related to in were

delayed had and approximately shipping from associated China $X.X remained times but Shipping revenue somewhat, million We expectations. normal, out are elevated than with longer into costs Asia and QX. of pushed our have also to in prior still relative improved Taiwan, shipments

revenue $XX.X from at products. with million Our XX% products compared and million In data XXXG quarter, in transceiver center $XX.X first from XXG was data QX came the of was our last of center revenue our year. XX% in our

makes QX in the XXXX. our XXXX business quarter of first year-over-year the this growth since of noted, end XXXG Thompson As

of Importantly, down from a is last we saw Overall, increased for quarter. customers from set quarter, last XX.X% QX in customers. which the represented sequentially our QX and data year top XX diverse center also a demand decreased revenue, during of from XX.X% of XX.X%

We are show to tangible our our to concentration. in reduced pleased efforts customer diversifying of base in customer results continue terms see that

among in year, MSOs, compared QX segment. Revenue from CATV primarily cable by was in continued driven weakness our $XX product America. to to North $X.X last of million Turning television particularly million products

China. the However, coronavirus. negatively for products of CATV was CATV occurs also by Since majority the our in our capacity production impacted production

stronger to year. half We half later second be upgrades to expect first in of than making begin year MSOs contemplating process in as this are CATV we're the several the of the plans the

remains our this these as segment. portfolio roll well AOI that strong believe product positioned technologies We given new out, in

working such this the of last replacement driven as Revenue in announcement is also gigahertz legacy from sales by $X.X primarily products one products our with is a gigahertz million APX newer expected was products, its customers to recent for our to sales bolster two increased million MSO deployments. Our qualify with to as network those amplifier segment, our XG designed in collaboration $X.X ATX products. of as for telecom one of Networks compared QX year,

lockdown to upgrade as we Specifically, carriers during increased quarter, China demand first the from networks. continue virus XG their and in recover there mobile the saw

CATV the from we guidance center For was both the our contributed that first other. the XX% greater customers, with two the remaining or revenue during increased XX% XX% products, quarter, with and In QX, data and we in data from telecom margin revenue, XX% gross in quarter, FTTH, X% market, XX% a In was margin had XX.X% center from of products, range prior Gross the generated associated XX% the year. quarter of XX.X% our coronavirus. to the QX XX% to total to respectively. and below of expenses compared due of of

addition, planned to QX for In earlier, out China related mentioned the were due there. reductions pushed disruptions cost work in I to shutdown as

We were will quarters, year. quarter the operating to cost of same incremental first see we the expect last $XX.X $XX.X revenue XX% million million, as Total gross with over of quarter be margin in several out revenue in XX.X% expenses of in these and or or rolling compared a result. next the improvement reductions

share, the $XX.X there mainly first was used in when million million loss last to compared ceased. a quarter G&A Operating shares parts compared net in of there $X.XX $X.XX QX or $X.XX loss non-GAAP Operating for The year. of $XX.X last basic share and to reduced an net QX due was loss to $X.XX during net loss from million. tax loss R&D loss of On of for year million million, expenses $X.X $XX.X and R&D range per declined for outstanding to our was loss of basic of of was or share of in $X.X reduced basic per QX GAAP was China a $X.XX operating to $X.X and shutdown basic as or tighter were per a the or activity supplies million basic QX the in R&D last with a below also of was a control of last of in of net loss loss guidance GAAP consumption net a per year. loss a QX per of year. million which million $X.X $XX.X of loss share or basis, in computing $X.X $X.XX expenses. after QX compares share, loss basic

sheet. of reflects ended and $XX investments first used cash total the the Turning in $X.X end million short-term at and We balance restricted This to $XX.X million cash compares million with now equivalents, for cash. operations. in quarter the cash, with XXXX

borrowing addition in had the to capacity QX. we the million In on at of $XX.X cash hand, unused end

not were in quarter, $XX.X process was inventory million QX. China production by in increase in to goods along driven ramped million shutdown. of in compared XX, in As in $XX the work we March inventory received finished The increase the with up some after as mainly that had

surrounding the Most building construction We to COVID these made quarter, $X.X prior year. in of crisis. we a total capital million our improvements. evaluating to level capex light committed and the million $X.X of including and in production on of And uncertainties equipment million $X.X expenditures of are in and pandemic, investments were the machinery still for the the in

Moving now outlook. to our QX

to to million per $XX expect be to approximately We to of range $X.XX, gross $X.XX $X.X share basic share $XX QX XX%. between expected the of count and and to in margin million, XX% weighted $X.X million non-GAAP range between of non-GAAP average a million loss Non-GAAP and the net revenue be basic is be and using in million, loss shares. XX.X

I over operator the back that, With Q&A turn for session. it Operator? to will the

Operator

of [Operator Instructions] Simon question Leopold Our Please Raymond first come James. from go today ahead. will

Simon Leopold

for the question. Great, taking thanks

So you able of year. particular your update full just beyond seeing? the puts thinking to us vertical to about longer-term just about traffic heard guide we data on and see how first, sort a all I if all the I the growth. And quarter, trend wanted takes and we've the could center some talk headlines trends. maybe for you're bit be you're necessarily not maybe could of to picture, to big about the little understand going if Obviously, But this second

Stefan Murry

prepared and Sure, a have the on that. the to Simon. do under remote precise virus from uncertainties have this precise hearing somewhat time in from all given that really we many more kind of I in the work you. I the what pressure constraints what any the I noted that networks quarter I remarks, say guide would in will expect think, our they better uncertainty give And progression Well, whole general, that on it's like and might it's need, you. are guide times networks difficult I some think you their our put in than surrounding as one their at customers in and It's and we business. address than result cases, to to a that. again, have that, would really out and But of to improvement directionally, incremental expected. capacity especially lot and this, if we're

Simon Leopold

you thing view we that's center? life product products is technology is by So XXX-gig as that if that things occurring keeps XX- the thing in or maybe in good enjoying case time. data for of that of benefits new wondering from a imagine you the gets the in cycle. technology new if one pushed out and And of that for extending I'm maybe a XXX-gig a bad your it crisis the intra

Stefan Murry

little labs how have a I it's Well, we hard again, exactly out, are little a to our customers it's engineers going a too. or of say that's think do that play qualification that they words, have to at test working operating not operating may have are able not and be would they other what or less have you. from than efficiency to normally. to engineers In have home, access their equipment and number

least to at expect So think I of qualifications short the term, those some out. pushed we in be

clear final that It's saying, look, not to delay Whether we're deployments? the this are qualification would wins at the we going high ramp-up actually quarter some an to that a despite virus, stuff, had the or of particular, are for ongoing. little XXXG previously of that have the but results a the all-time bit I delay again in in were emphasize that in in customers the efforts first design we point. seeing Although nevertheless,

anything, think newer they're try I to technologies these to motivated if they're now more that in. get

improve they think capacity customers many I like cases. add in expenses things and certainly for that will operating they'll and the

really up able delayed when to whether or whether able on little bit. they'll be to it I going time that want and get in ability to on these the technologies. to might be need start recovery to do these So they'll up qualifications in. be whether able in are And to how they think a technologies Their to be do lined schedule their all what fast to get as get it's to do normalize, to limited done they employees depend happens their things ramp

Simon Leopold

your on And bridge quickly, the can gross mentioned? the it if shipping have for margin, you margin, wasn't would met you maybe guidance it just wasn't gross if you issues

Stefan Murry

only wasn't issues. it the So shipping to related

able during quarter of quarter mentioned the to the were shutdown China. we remarks, the reduction in As a do the not intended our in the completed because we of during lot to that be prepared cost efforts

So three additional week week almost three we there. an shutdown, had shutdown

cost that we able intended lot work a to to so we the weren't of reduction finish And do.

will that over couple the roll next So of quarters. out

wasn't efforts. shipping. the the to was related cost to It also it reduction the So only completing related in delay

Simon Leopold

And X-K of April, I one, note PPP I one money. if filed $X taking just last if the you did an might. roughly million in

see out the in a And do want additional Just context. to you the opportunistic? of How give for consider have need to if you taking us can business? expect some to you Or should some Was essentially is there's should think being there this about we we this that context repay grant? think this? Or debt? reason

Stefan Murry

Yes.

something loan this So flux point. much the is PPP at really very in that's

think going I daily and like on just an avoid change at to guidance specifically I'm because almost basis. that commenting the on seems point to that this things

a when our around in applied we then, out, economy. comes guidance global as the to we loan, So early Since and April, evaluate certainly uncertainty really to great we'll for forward. continue as of there that the operations it was continue go monitor the and we deal

Simon Leopold

understand I much. go Please very that. Great. you Thank ahead.

Operator

Our from next will Samik come question Chatterjee, Instructions] [Operator JPMorgan.

Bharat Daryani

you for my This thank on Bharat Samik. Yeah, for Daryani taking is question.

still segment. highlight was you So data the have? mean, and three level. what especially can have that customer had noticed the has you what been I first the at spending are trends large question customers customers center there I by, there the the reduced two with spending that I XX% you

pickup there? from So expecting half question. Are That be you a would that any you have customer? incremental still second first visibility the

Stefan Murry

customer on trends. we So comment don't individual

first which XXX-gig in was quarter the a since lot this in of very now. mentioned, of in early I fact trends the cycle. XXXX, positive the year-over-year there's end right the data discussed We XXX-gig center growth think revenue I of was As that the

XXX-gig number we're in to discussed only business customers, the in continues this actually we that from also had is not very bear different a that from win design activity a just that of customers couple of and broad-based. increase It's that the seeing out. but also quarter We

So of it's in in business or And on around with in when it's particular. as Simon, dynamics to general much say. some about about we the talked XXX-gig difficult just in XXXG, to again, finishing increase customers, ramp, not qualifications two about center a one broad more starts little it's in that data the a and

Bharat Daryani

mean, you on I in this question just wins, Got very of more XQ XX-plus said that also XXXX, wins. and year design it. was And design then highlighted you I one wins. think design terms the strong

any wins particular I just in So you be that that any see the a highlight second could it building, potential anything in seeing that cable, mean, where in could highlight? half, particular telecom, be it you are momentum uptick there? you you could segments have

Stefan Murry

I little bit I Well, extra perhaps color give that. can a Sure. of mean, on

five wins, of First we XX had, out were with the wins design all, design those customers. new of the of that

So design that we customers the of wins had quarter. list five among new in

data One of XG them those new and we before, are sold China. hadn't in to deployments customers was of two related customer to center that previously a

see strength, to to center build. signs also of China network addition in we're early around data So starting XG in demand

I think after the qualifications to the customers to finish after normalize in shutdown books XG. started to coronavirus see orders there, activity get increased started on related we and to from China as things the trying

So of among the I that's another customer think new notable base. strength area

Bharat Daryani

question. taking for my Thank you

Stefan Murry

Okay.

Operator

of Our ahead. go next Craig-Hallum. Flynn Please Joe from question is

Joe Flynn

either quick appreciated. a in between or XXX-gig on center, quantitatively center XX-gig give and give Hi than guys, of the growth? rather XX% question as how split you if the driver And qualitatively you would us guidance. the that a Q-over-Q wondering much I could a data be XXX-gig sense could data is within just of was

Stefan Murry

Okay.

the of relatively So just growth TV in as do fact data cable mean, as smaller related noted, between much of we TV stronger we QX by much is amount be center, the of come to going center? QX revenue. is the to to growth and half, that the second most as is far the expect from of data cable how I a virtue but

of terms sequential the you're come growth would to rate. mostly center it at in the expect I growth, So data to if come growth looking

As looking it XXXG versus was G from the far the XXG and the around I'm XX% as it specifics XX products XXXG was, number products. here, from for about products, XX%

or data so the and point, the end come to where driving this But today. we to XXX-gig perhaps that's at of is even year business of growth, expected So maybe toward expect continue XX-gig, is are the in speak, clearly of we on. most to to center business to close I bus, XXX-gig XXX-gig depending see the revenue. think, terms XX-gig from

Thompson Lin

the with compare the QX, growth don't XG. in the We

Stefan Murry

course. well, Yes. And from as XG of

Joe Flynn

pipeline by year? Great. win just then update design just expecting, the off And a And specifically those any Okay. of lines, XXX-gig? I you you're question. wondering guess, customer I the if I piggybacking was on along end have guess, or this

Stefan Murry

design Yes. not during have design power. XXX-gig win We did a We did quarter. XXX-gig the have on win one product

Joe Flynn

thanks, great, me. all for that's Okay,

Operator

today next Cowen Our question Pate will and of come ahead. from go Please Company. Liz

Liz Pate

my remind for And missed my answered, in year? XX as the Most you of a revenue with percentage customers Can and of quarter have it. question. last last the taking thanks were the top compared quarter? may Hi, what how but I questions me that been have

Stefan Murry

Sure.

XX.X% in the in year, the was quarter And So XX.X%. quarter. this customers In top the it quarter, prior XX revenue. prior of were same

it be would XX.X%. was XXXX, that QX So

So XX.X%. this quarter, again, QX last XX.X% year, XX% and last quarter,

Liz Pate

think missed on. you, to what I good And in you of showing So China. said XG before some new related diversification I are customers, deployments new two were the going five And that. said XX you to

Stefan Murry

Yes.

new had page. we just the were So design five those in on quarter. wins the sure XX customers. we're same to had make of We

were two total of in five to new the that's So was China. center customers, one And customer five data design business related XG win one a and each.

Operator

from next Kang go Riley of [Operator is Our B. Please question FBR. Dave Instructions] ahead.

Unidentified Analyst

on for [Indiscernible] XXXG you that. the Dave. I the could if was crowdedness actually comment is of Danny s guys this Hey, wondering can any you give on market, on color

Stefan Murry

market. the what on not that? you I'm sure XXXG elaborate of crowdedness the you by Can mean

Unidentified Analyst

launch what the time XXXG line competitors? add increased pushed there competition would out, from if meaning of is, guess, I'm I the be is like, Just

Stefan Murry

can't Well, I that. speculate really on

in Simon, of is pushed First that remarks as all, not the clear I out. mentioned to with it's be going my deployment XXXG

think for on very that whether If more deployments be whatever technology at XXX-gig would more or I getting in terms of competitors interested quickly really And in is is as with difficult that as than and of I reason, customers were are to making there'll that not smaller not. can I way earlier bigger. the many they speculate do expect. cases. in out competitive under trickier those can't think has effect design significantly landscape the specifically rather manufacturing than generations generally of products. an out that push play But the how happen

Unidentified Analyst

comment helpful. Got you was That's wondering in and XXXG the on if the I could I And XXXG it. guys markets. environment pricing guess,

Stefan Murry

XXXG really So not. pricing is

Unidentified Analyst

XXG, I XXX. did I sorry, say not mean Oh,

Sorry about that.

Stefan Murry

terms and pricing XXG relatively XXXG products. Oh, of different in pretty stable

as more We declines as PSM average talked less products, I product seen some and mean over been average about But mix calls. couple CWDM, far have in price as in some fairly on stable. issues the of due individual to it's XXX-gig, earlier last we've quarters price

Unidentified Analyst

got Okay, it.

Operator

time, question-and-answer remarks. Lin will gentlemen, any turn over And for to at conclude and this this Ladies conference the Dr. Thomspon like to session. back closing our I'd

Thompson Lin

for you thank joining Again, today. us

and thank to always, customers As employees. investors, you our

conference. of our continue for We virtually to upcoming at we many you investment see support

Operator

gentlemen, We and conference may presentation. attending now concluded. has thank you now today’s your ladies for lines. And And this disconnect you

Applied Optoelectronics (AAOI) 9 May 202020 Q1 Earnings call transcript