NPTN - Earnings call transcript Q1 2020

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Operator

Good day and welcome to the NeoPhotonics' First Quarter 2020 Conference Call. This call is being webcast live on the company’s website, at www.neophotonics.com on the events page of the investors section. This call is the property of NeoPhotonics and any recording, reproduction or transmission of this call without the express written consent of NeoPhotonics is prohibited.

I would now like to turn the call over to Ms. Erica Mannion at Sapphire Investor Relations. ma’am. ahead go Please

Erica Mannion

are you the us and first quarter Financial me the Thank and and operating Eby, Beth outlook discuss results second Chief today With XXXX. for quarter of Jenks, for afternoon. Chairman to CEO, joining Officer. NeoPhotonics for Tim Good of XXXX

before will of the Tim a call drivers business to for discussion questions. review business the before then financial comments in for the providing Beth results provide begin opening quarter the for Tim then will of a the for progress first of Beth and company’s the final XXXX. back with turn second first and outlook products. quarter call the quarter will

of statement financial all otherwise certain information, including The revenue, balance other and and non-GAAP during company's press release discussions management's measures income and amounts unless statements than and sheet noted. percentages include this call

with substitute of These in prepared non-GAAP are accordance GAAP. prepared to measures and measures superior a are financial financial accordance with or GAAP not in performance not for

found section a measures website. with press company's the results non-GAAP provided are Form financial GAAP can to Relations NeoPhotonics reconciliation the These and and be SEC being Investor filed in related the on X-K, today the release of in and

industry are and Material and events. which business levels, technology future risks all not copyright is or include involve historical rights considered product contained and in may statements this the and demand, with that call, the facts, development, and of inventory statements reserved. in results, NeoPhotonics, subsequent webcast sole property economic conference Certain forward-looking uncertainties statements customer regarding projections, be

differ Various materially. factors to actual could cause results

length XXXX described set our release Some press of filings. and dated at April annual in and XX, forth our SEC quarterly factors been these are in have

CEO, Now, Tim turn to over I Jenks. the call will

Tim Jenks

health remains is company the and thoughts first of Erica, supply those priority as At global employees, our of a and afternoon. well-being the our at of our and forefront you, and COVID-XX home, the and our good work at pandemic collective partners. Thank

operating are full shelter-in-place Japan impact, capacity, factories our Currently, while China with producing running under steady some with orders labor our facilities North and output. American are

Our to but recovered, potential chain China emerge. largely there for new risks supply suppliers have remains

the place world have outlook. address and health we these manufacturers public QX confident guidelines, ability our around we with teams comply to local to As are in our in support issues

outlook to and Chinese margin first NeoPhotonics gross strong very our the the supply revenue to shutdown above Moving million, normal delivered our of issues New quarter XX%, Year range, chain pandemic. due extended the non-GAAP expanding results, top end seasonality, to $XX despite with of COVID-XX

our by the end was which represented year faster growth combination DCI capacity This customer cloud by continued and XX% where the last and as address more emerging strong Metro from was well revenue for of needs demand west, in solutions both driven in players a carriers. in quarter and revenue, XXX-gig markets XX% as the strong leadership China, same of network bandwidth and of

our our strength cloud XX% unique and coherent focus speed center networks leaders hyper-scale in ultra-pure and reflects our coherent high were speed and High including data technologies. to revenue. tunable of products on transition industry continued products, networks, in of serving the light lasers, The datacenter performance telecom

XX% lower first quarter year. XX% anticipated and in same in dollars in is last from returned up quarter due was customers down XX% as contributed terms has was Huawei, our pandemic was China up the quarter. in from to China the four largest during of following our customer, of which next revenue, revenue, from terms percentage as sequentially strength the Revenue XX%, demand the total generally onset. This

for network. their tender the ZTE east the deployments the won ring covering network west national in released Mobile ring are backbone, national haul results, won distances. China and that Huawei backbone China, Within phase-XX which long these Note

We provincial expect rollouts. deployments additional support in will followed of backbone XG installations national in be by China

these will doubles a QPSK typical in deployments an expecting data-carrying We capacity that of effectively Super are use spectral optical C-Band new portion the fiber. China which XXXG window, and modulation

the leverages for Gbaud our module related C++ being use as C++ deployed important, C-Band This XX is NeoPhotonics, distance; are Super LASERTM For China. and over this together key combining of in baud first high solutions. and technology product the and spectrum combination is component advances rate speed

increase together rate is which speed Super with range, high capacity, the using over For range. designed wavelength our also C++ these longer achieved components; specifically XXGbaud distances, To LASER work our fiber can to are you more over baud full spectral C-Band is higher efficient. expand using the

attributes We these these expect that ultimately adopted. to broadly will that stay, here and be innovations are

data Addressing modules. cloud recently we coherent markets, several introduced new center and DCO

In three addition for leading form such DCO to QSFP-DD module, OSFP sampled factors all modules coherent to and has and now customers. XXX-gig applications, sampled now we modules coherent XXXG CFPX new our in XXXZR have NeoPhotonics that

enabling offer reach modules offer optical over cost distances, factors up Cloud in interconnection. the metro DWDM XXX into routers, DCO Each directly QSFP-DD and distances. complete DCO over IP switches per bit of architecture, OSFP our network ZR+ The center reduces connections the greatly plug and to performance, form kilometers, ZR of modules to extending and that also data which

traction fiber gain our are of over ability spectrum the products or XXXX. our in wider they increasing and work to believe laser are with tandem modules. CFPX ramp our These have high differentiated components how speed operate usable and how the L-Bands, over tunable in they further C++ capacity. other products We And modules when and C strong the will examples these

most build in deployments, to continues for China. notably XG Momentum

recent the not indicated deployments have be pandemic. Mobile their the by tenders, in evidenced that China major XG will COVID-XX China by carriers As the delayed

region. the by vary working accelerate utilization home, have increases increased XX% In proposed and reported more west, or some XG people network timing XX% CapEx with from carriers of many though to have carriers deployments, to will

is provide customized ever-higher single generation filter which speed XXXG, further a XXXG and on that unique systems are products plus supporting at shapes, channel and which systems having Each of also multiplexer XXXG provide. networks high these capacities next introduced. of are new require XXXG, now ramping wavelength; products spacings and NeoPhotonics we being rollouts underway, Deployment currently

In bandwidth environment, remote drivers the pandemic the creates. long and business trends about the needs due to of the quarters the we in uncertainties the global and it remain few but continue our given also the under under the favorable ongoing are to about medium be increasing working current next We cautious optimistic pandemic. term industry,

Beth With will I call that, Eby. over to our CFO, turn the

Beth Eby

of than our afternoon. by strong higher team range, a and a good was non-GAAP outstanding and execution quarter, quarter. on you, Tim Thank QX EPS suppliers our in resulting our in $X.XX, difficult

more to QX Moving in performance. details

up gross revenue mentioned, range. margin above XX.X% midpoint point pricing offset from year, This product lasers. favorable Tim our leadership of nine the of our was Non-GAAP was nearly annual XX.X% reductions outlook. same well million from a this the quarter As last QX our above Within mix. one by product quarter from margins the was last points $XX.X driven by than were increasing

sales improved shut underutilization points of charges of about two down. extended related and New comprised the mostly were of Year sequentially cost Other charges, X.X Chinese to points of

over fabs in on March. most just as were on from Just reserves than product two China. eliminated our and U.S. of last This under of products shipping into of tariffs a lower sales half our inventory points point is charges quarter,

teams fewer travel, events, lower of marketing be our quarters. Total to push of was million added related million, one-time terms QX, was reductions and lab. QX in are R&D as projects from $X spending remaining impacts the as non-GAAP a of reductions for and to R&D not a reduction first $XX.X The license future COVID-XX of quarter the from to the down operating were in R&D a million expense fee as some will temporary The credit $X.X expected.

GAAP depreciation X.X% relative $XX.X global first operating of profit Non the million. to approximately U.S. exchange of yuan dollar, Chinese compared In XX.X% quarter in to $X.X or the the QX foreign gain QX. for million, was

As quarter is of exchange the is beyond items gain China driven rates. sheet to FX balance of the our the operations functional a reminder, of end by the revaluation China currency

we said losses FX largely have gains as any we As regard before, and temporary.

$X.X quarter, reflects non-GAAP in add a million in the XXXX. execution. income of increased $X.X million of $X result, first continued million, the to reflection results is As value fourth loss in products quarter income quarter our This improvement strong was a compared first of net and of the the and an for a

I will a close out with income of my discussion of the results. statement first quarter GAAP our review

to was slightly product Quarter QX the first XX.X%, XX First gross in an driven last and improved compared increase points of by quarter mix. year, margin and volume up from up

based included profit $X.X Operating and million, impacts lower expense million, for first $X.X amortization a $X.X $X.X quarter of which intangibles. $X.X credit period. the down acquisition on one-time was profit quarter the spending million stock related the of to of million prior of was Operating related profit and $X.X expense, for of the compared approximately million $XX.X COVID-XX. compensation was in million Net license to a million

term good free million, $XXX down Turning focus flow have to restricted paying days we cash. put cash, a to lien in debt and us the couple on well years, $XX and the as paid and heavy cash at sheet, This million know, at balance of debt. over cash last $XX you Long investments cash inventories with emphasis has down XX million. positioned flow

may emerge withstand ensure we said, of the rest through year, to positive of that That can a are both taking and variety that we the scenarios potential negative. steps

this, to As supply buffer chain build part volatility. inventory are to of we working

revenue would discusses results forward-looking with discuss filings I included remind that quarter for risks outlook XXXX, which press of our affect to Before SEC and like performance, Harbor our earnings in our future our the our causing and could uncertainties second everyone differ of public from to release, statements the actual Safe I materially the Statement and

increase there to network capacity is believe increased immediate We handle demand traffic. bandwidth the

We continue chain to risks. supply see

their approximately to included impact due of We revenue suppliers down, local XX about shut have as they to with outlook health million our concerns in orders. comply public QX

the second supply We risk year. to the of into continue expect the chain half

$XXX reflective GAAP June to in margin to of diluted Given range non-GAAP XX% earnings These million range range of million numbers in expectations quarter per of diluted XXXX XX%, XX% for diluted and a loss range the that GAAP profit. shares. $X.XX of are, earnings revenue $X.XX in are non-GAAP gross to company's fully in the $X.XX share the $XX in of gross XX%, of XX.X $X.XX the the margin approximately to a million, profit, per share to range the the

demand in trends term remain industry. We confident long for the our

progress We in pleased exciting made environment. a become and the continued volatile with are that with business a products, to consistently profitable have strong we execution

will to call I turn that, back now Tim. With the

Tim Jenks

Thank you, Beth.

future. profitable trade, Needless spite of the in another quarter low deliver to from to notably pleased our are pandemic. optimistic quarter, say, headwinds we're first and our seasonally We about through bands

China short down a pandemic, back strong. shut the for was and Through only came period

they're is a deployments. Now, for favorable This supply us. environment accelerating

our As even products systems high performance in high enable. greater value speed bring and they the

world's new and position as with new differentiated DCO speed large product see customer C++ demands strive more the and and receivers high product center lineup these modulators strong Our XG plus XXXZR cloud our Expanding of networks. gig Nano center data their and tunable well modules, including our and and lasers, new our telecom coherent Moreover, offerings market that XXX high speed capacity markets. for we well competitive in launches, as new, trends data align and TAM bandwidth serving and in with

forward, to higher with direction and move performance requirements. look higher we industry the in continues our As

differentiator optical high the components this capture is we As more going will believe and this increasingly forward. that value high occurs, performance of be transition to NeoPhotonics and positioned speed

our to I questions. John? for like the would concludes open up to operator the And line now formal This comments. ask

Operator

you. Absolutely. Instructions] Thank [Operator

our Richard. Craig question. At this time, would question Shannon go is Richard from take first Please from our to ahead, first And Mr. I like Hallum.

Richard Shannon

may taking first start question, Tim, very you quarter imputed to when the you on the COVID. on I year. a first ask Thanks, results If Beth, questions. would from guidance from for a Congrats $XX million gave my the that nice impact

able were numbers see roughly there beat didn't any still there beat mean and by issues Does $XX that midpoint million. or you You by were to COVID risks some other missions? the you the

Beth Eby

of mitigated We in largely the but as well. see risks, increase some demand absolutely did an

some Some business. just new --

Richard Shannon

Are favorable mid risks points, if little about, chain us in quarter first normal, others? these trend you Okay. the let's here, the worried supply take modest strong first guide a of built Other quarter. environment that inventory some the than you in And you're the especially second unpack, in a just building growth here such of from with that you. help a again is into bit quarter quarter what you lower like can for here it's that in looks had second looks because kind your a sales

Beth Eby

COVID. a is the quarter, $XX in little companies was -- we in to related that again saw in risk just quarter first we're bit the would start the than second saw a what The to higher for say million risk I having Yeah. up first we because in China. quarter It's waiting

a with by dealing supply set are suppliers potentially we're much Now that of impacted COVID-XX. -- broader

shutdown. periods back And And I’m to some up. of have come of them trying

Richard Shannon

Yes.

Tim Jenks

them I'll Richard that, that it the that actually over just is to in impact. quarter, risks time quarter, actually seen first in out and second add played some of the was we've

just all mitigated been of it's and So hard all risk though of it. hasn't not on working it we're

Richard Shannon

and you're or chain say watching you mortgage closely cover for… would all generic Tim, So the supply statement they just very are risks, specific

Tim Jenks

come orders that or to world countries play up up, We've out. made impose of will those even And over shutdown that out a at the capacity, health the plants two And you specific. in And continue very they'll local about a shutdown they months. that XX% then actually come we expect certain if plans. when They're no. a times it no, and XX the sometimes that public problem. comments seen last play have of number No, we they

specific. very and real very it's So

Richard Shannon

Okay. That's Thank very the helpful. you. I will on jump line.

Operator

Our Northland of next Capital Savageaux Tim question Markets. comes from

Beth Eby

Tim. Hi,

Tim Savageaux

Hey, good afternoon.

Tim Jenks

there. Hey,

Tim Savageaux

I was lock the number. first China well, results. of -- very spectacular. We you -- missed at with got should down question, regard kind question. your isn't percentage well, It Huawei the I on what China more but often. the XX, I first I I Congrats if wonder guys was guess, overall again? mean, quickly,

Tim Jenks

was overall XX%. China

Beth Eby

you just where finish our it's demand. ship customer Americas that Just to was world know, rest China XX%, was as as XX%. of opposed XX%, we the that's But end to was to

Tim Savageaux

that. Thanks Yep. for

strength pretty lot wonder QX. of Well, mentioned on tell in could it's in whether I backlog strength Can you clear, that particular, there. to yet? drivers the if you a on looking you the the Okay. various backbone talk done China we've And at of seen you've work your

connected DCI morning. front positive from heard lot this and we've Obviously, or comments of of a to in this is mid some China in XG Nokia hall, hall terms about

at seeing, about talk feel those the you this total look you least drivers as absolutely across wonder of with extend if terms of So strength categories? to range your that in you're free but business, at this various you're I starting in and could China, it

Tim Jenks

are question China, in We've is have XX, reflected I the in talked we said, follow prepared forward-looking seeing is first it. it the the are And answer In for of we your remarks the on. the expectations our And and or part about quarter. the it? seeing provincial is, phase yes, guidance second on it we --

In addition, XG these rollout. supporting are the overall

have have this they deploy So within depending certain carrier, timeframes to on the tenders calendar the that created year awarded. been

during be carrier XXXX followed by for DCI. example, out play and we This phase that all we to So is then telecom expressly -- and while not is large provincial. XX, the wasn't one a it expect tender, would to

Tim Savageaux

And on you’ve of those this provincial backbones would Right. continuation larger you've this in what guess the and that here toward, XXXX Historically, seen kind feeling relative of XXXX? were expect awarded, or magnitude impact expect you into deployments year, are with just on to later the would sort you what your eye following strength in of in significantly first awards And the of seen of the throughout I half? an for perhaps sort to I commentary. that and provincial regional provincial asked sort in

Tim Jenks

awards Well, the national provincial follow pattern backbone. has been that

our can't I'd either primary know or And timing it, see magnitude. expectations. So not though, having we the such really Until that the speculate. the we actually for rather reason is

Tim Savageaux

enough. then COVID kind Fair QX. impact probably this sort have been probably seen seasonality won't and Well, try. of normal one, a in degree we'll a to overwhelmed without your It's answer while up but some would give we've it and been of since

and I standpoint, role you're what QX a compare year expected play kind consolidation to in better results? your demand think I industry. And a if the wonder given a seeing we've standpoint what this both seen, saw as which you pretty that then than is that pricing XXXX, from big a well, now you maybe can and for of was did

Tim Jenks

that few some we risk there Yeah. go-forward that recall going saw in a mitigating China and their XXXX. customers plans. and but procurement And also Couple XXXX perhaps quarterly soft year, things were by in our we had strong increasing back followed years, express two their certainly a in the did we was West, who calls a last in actually very

inventory these for need prove chain potential supply we be about think cautious I think customer reasons might to well I a how the of little as risks, out. So, as it

pressures aggressive have environment with the of trade been not Now that on the EAR, as BIS we in as has as rules seen well a was U.S.-China pricing years. prior situation as quite it

has I fourth quarter, in in quarter been So bit think the recent most -- and the certainly first quarter. more and that the stable recent

in a favorable. yes, situations, So those it bit is

Operator

our next Cowen. take Silverstein Paul We'll of question from

Paul Silverstein

resets us the of the that, was stable, more benign I it's Can correctly. question, vendors was that you XX%. of that lot mentioned on correctly? previously. And that side if recall sure pricing, been to think more understood just I a understand was citing You previous just can the [indiscernible] it question. price benign you have common XX% that more I historically, the just I referenced, Thanks. With to Did one, it quantification? I to respect -- than you other and before make you the Special give

Tim Jenks

No.

range. at the was Your was and lower range, at end it Paul, precise, was memory -- that of it that is the

Paul Silverstein

that, And it’s benign previously was more on so productivity. consistent. the still of And side it's

Beth Eby

Paul, higher and I mix are is the moving we higher Yes. well. And to performance but other thing that -- parts as mentioned, that

does some that that historical helps and more So of -- that just offset average. benign

Paul Silverstein

right. All

[indiscernible]. So

need I are up make -- other that by where are they two lasers either saying therefore, extremely rates, and to tunable off is I pricing with line rates assume fewer are beyond, the critical as to want [indiscernible] one questions, critical to ultra-line achieving Here for pay components. opposed the that XXX you we expect number components not [indiscernible] competitors line competitors are is and don't and customers and may of to XXX-gig critical can definition, that those assume that as better. relatively and that

question China more as of outside Any terms offer et from world the non-China, could in all trends other cetera? of Appreciate and you're color can cetera well product as is you what China, of Asia-Pac, The in a it. you market, of rest long demand from beyond EMEA regional haul, market, DCI, us add? a insight terms seeing et

Tim Jenks

And -- in mentioned product the on couple Paul, mix part the the remarks first prepared the things. I a

coherent and think order, we if differentiated our lasers have components lasers, So versions. new several about certainly, are modules, in and coherent we

ability So then, Laser of gigabyte at is the rates example, players, the our the number product provide to XX product And it's to relatively for I different. at is a C++ number. that the Super true a C-band think laser with smaller higher symbol

domain. does this that in certainly matter So

little customers. difficult yet, With into between about line say such to cards, of modules, DCI not for really discussions of a but, pricing. happened, sell to Western XXXZR launching fact has they're lot this production impacting respect it's differentiate of more haul point, and the at volumes as we components a the Because modules long the the that products they're not so into

and well. have no we data that hope more mix their proportionally product in customers as doing helps. that of business reflects from that in doubt center I Although, are noted some

Paul Silverstein

Europe, book demand regional when a can you what from really China, are answer look add? you seeing America, color perspective, things you if North to -- are incremental we any at Can shipping

Tim Jenks

Well, let's see, was certainly build. of we were we about what end the saw China, in that concerned XXXX, China at inventory

generally world strong so it how U.S. so quarters our the the we're has and released year stable, in so at Japan and has would in of strong consistently be work North EMEA some last two in rest in through reasonably, say, is China. higher strongest China particularly China's in But tenders about really speeds. Japan. but going by Japan. in seeing we're cautious Now The by the looks relatively followed means system the to too, notes been positive been we'll which the later that EMEA America, I followed

Paul Silverstein

that. Appreciate All right.

of I with mix, your quick particular, but and lasers there trust one So terms revenue revenue you module of lasers you very this overall share overall get dominated But don't of components, so the specifically respect way. is to any is can view, in that's terms businesses percentage what us what with by business any now out sense small, equation? clarification insight know by in till in still revenue, I very, are of in

Tim Jenks

lasers. types different Yeah, we recall that of have several

wavelength approaches And so, total all and That in our that in are means, hall are components. our of centers And are length for conjunction are that used means, our the sum DSPs. XG revenue generally in data are lasers Hall that current used half and generally used which is are of about of example, those fixed lasers, EML and front lasers then systems tunable for coherent mid with lasers lasers. which

of lasers. important have lasers broad So different types part company. of But it three our does are

Operator

comes from Henderson Needham. And of next Alex our question

Tim Jenks

Alex. Hey,

Alex Henderson

think demand? through Given the sense more in alternatively, in the just you're Which that To the inventory you. product of that they're build any we out that fact inventory there's the building into more of is is whether that's you think that what could trying think rate for we they're But inventory concern you from to be that continuing hoping do of the Hello. you the chain people instance to do year. also as causing I as them? service talk same Or be shipping more about as the that shipping at Do do to build realized forward? trying built? a to have shipping fast their go of Chinese things. extent there might that with bit little it some more you're downstream or -- a supply think was terms shipping prevalent? rate end consistent they're to dynamic the go was as rebounding I providers, you you you're side

Tim Jenks

let's probably shipments than we're Well, first the their in out. to seeing see the think quarter, them in more shipments I

as these we we question, QX, new saw during earlier an However, tenders. talked to response in about

those so referred Mobile, to and there done additional I And specifically are China Unicom now Telecom. China China by being but things

And accumulation. balanced so, second use even potential more in quarter expect we or more than

So, of quarter, I all customer China inventory down. think QX, I sum probably was think the increasing. it'd And flat second in to the be probably

Beth Eby

I if there get have on supply Alex, able some our but would inventory unconstrained chain. were building to think, do we're full, we constrained revenue to been there,

Alex Henderson

Right.

you concerned get So constraints being you? timing, very that hearing to when about an accurate I in and you you to are pushing about by customers bind back ship that product assume will assessment? the more would calling your That you you that reflects your from availability product is customers frequently

Tim Jenks

and boats. kind hourly. it's asking they're chain in more the we -- They're they're they we're when. situation with pandemic, understand sometimes us We're different just same in daily in issues the same the storm, though not that are. of Well, supply all But much ping they wrestling the

-- everybody's it. wrestling there's so And with

Alex Henderson

sensibilities to the accounts, If difference were any flip China is accounts? on your -- to focusing from those you in that there towards Western

Tim Jenks

the living ecosystem months yet. a this can and of kind with really. much. the aftermath you quarter don't No, of the of from couple not pandemic. of I really think haven't We tell through heard whole I don't enough know I actually enough

Alex Henderson

Quite cede reasonable. floor. the I'll Thanks.

Tim Jenks

Thanks, Alex.

Operator

comes next our Sameer from [Indiscernible] And of JP Morgan. question

Tim Jenks

Hi Sameer.

Unidentified Analyst

is actually Joe Hi, on guys. [Indiscernible] Sameer. This for

Tim Jenks

Joe. Hi,

Unidentified Analyst

high-end guidance want would as that I get And obviously, dive well. high-end into to guidance, to an of gross dive the the performance. quarter the line Hi, of of that kind and quarter, well into how of performed understanding of this get and guys to margin what's high-end of how's very it going? progress. my kind on strong historical relative obviously wanted I the question, you the to So margin kind guys in your just you gross first driving

Beth Eby

particularly margin, also have So reduction. also impact swings markets one that One mix product of the It been the as between quarter alluded a that point it for this that the gross in half U.S. on point the different in different last my tariffs been our any are products different cost a that's China in of our well impacts the to given margin and running and baked going on levels gross few underutilization. things thing cost, quarter volume, quarters ASP pretty of a our March, reductions eliminated. the in tariffs product in into have is margin. China unusual I remarks is And of is products

the product bulk of to And tariffs. the the what ends quarters we'll and end low of range. And this mix the difference, next of frankly, quarter up elimination or see between So end is that those doing. that'll swings the high

Unidentified Analyst

some maybe pepper OpEx we the was as product be on the to on One expenses learn two the higher slight but cadence expecting you're of of you market, the that this you through of year launches expected year, guys so mentioned, to as the current last you this having expect one layering in side, go on second expect your OpEx a OpEx clarifications increase down, do is, And go still the these bit on that. year? being, investments and the you obviously that year, through quarter, kind then new R&D are how we do and OpEx little then a said guys you

Beth Eby

of had variability rate. the one good pretty QX million Neo. and that. the than said around to idea guide in straight XX.X some out said, of be a $X.X unusual a we There'll more Welcome credit, that That don't We give quarter. midpoint -- we we stable you run guided

Tim Jenks

subsequent expect be overspending Beth first in to quarter that remarks did said added with quarters. pandemic prepared the the and Joe, we we As to in the have the

Unidentified Analyst

Got and if just… then I it could

Tim Jenks

the work done. same Get

Unidentified Analyst

customers it. interest there. Yes, China seeing Understood. what you plus-plus got I you guys have to the products, Chinese will are could world? that And China of or obviously then if to the or I'm to would what outside what end, guys my of your interest that you. that in just customers on or rest some relative more finding been C I strong the Chinese curious, finding drive drive And just interest are -- why guess from expecting product? Thank point, one

Tim Jenks

fibers working the carrying bandwidth data services. of an about -- increase all middle bandwidth are of themselves this it's situation the demand. installed. work That people with and China, plus-plus QPSK which People talked are C that let's around use or in as talking the the year want the to last my Well, home to that technologies pandemic higher And has capacity the cloud is availing C-band utilization interesting in C-band of about going over remarks. already be in on prepared I And you see with been Super width means of from that kinds a Super of modulation, these the what does. and

for So and awarded, expect a that they've to year now these deploy. it added have we been they new tenders

pandemic. all this structure then a it going the that decide is more that to that before take on time if that a are need be recent months. problem value ultimately in but there solves or the extent channels amount solution to further, capacity available existing see and next the next works. if also that on depends it proposition know similar fill deployment the more through is know, initial It's gotten and you the to you capacity, But to increase some other for is problem has that capacity applied engineering of a particular of available bandwidth fibers, has fiber to assess just first them set parts as to because current we've that gotten world, adjusted it'll to starting and, interesting It technology

Operator

Okay.

from will Raymond come Our question of next Simon Leopold James.

Simon Leopold

Thanks get quick Wanted taking color a maybe for add question. to a here. clarification or a

in You did Did have of customers strong. you you business revenue exceeded the being quarter? other any highlight Huawei the very XX% that

Beth Eby

We had XX%. customer one that other exceeded

Simon Leopold

exceeded XX% much know by? they we Do how

Beth Eby

they discussed to we their As have cite asked a times, percentage. of us number not

Simon Leopold

the as view gets the and that the then for I still in how when market us with you. timing think to XXXX? business XXX-gig products up opportunity, do started. What early, understanding Thank just And about you Okay. you for having follow you, wanted total opportunity but available becomes material it's

Tim Jenks

the parts to now, but of to more It's I business are of parts than of I two have see XXX it. let's there our have Well, gig it. two opportunity, right describe XX%

that gig in into first a cards driving than that The line fact being that range sold the part components is is that volume are go today. wide XX% more XXX of XXX capable we gig and have

we which DCO the have different factors. is For us three form modules for

space. which factor the a DCO center, for these have QSFPDD We and an OSFP CFPX And Each is DCO carrier favorite have module, modules. form we then the both data telecom for of XXX of that moved the and gig couple a have expect expect These right. the are of things XXXX through to few course frankly we DCO months the we ramp to modules. in last months, a

So, XXXX what or been quarter might mid-year your second I that early even might XXXX. in the have question. now hope answered to move

Operator

of Riley King our FBR. B. question from comes And next David

David King

you Thailand Can production Japan afternoon. and status? us give Good an update Thank you. on

Tim Jenks

full both throttle. They're Sure. running

David King

So current at this impact from any not not point. this million local -- XX quarter part no impact for And they're of -- second quarantines making quarter? you're

Tim Jenks

an Japan, running we our only speed. this In is were our It's a period. running conference as labor just and that on provinces in we quarterly they the in our after China. is light from it But New also so returned Yeah, Thailand force from production China returned the over not true extended call, China were And last fine. few throttle. other running full was were is weeks, full but in labor. next Year China This able,

Now…

Beth Eby

supply million the Dave pure chain in XX is multiple locations world. in The

Tim Jenks

was Yeah, impacts of we the cetera. practicing locations, with you our and low from in running say et other know we're each protocols density have just to working, et COVID-XX distancing wanted that I cetera, social thing of and

well running impacts fine. getting used are there gotten just it's work right But We've and So moving to everywhere. all all of into the terms done But are in production We're it. things we're only, it. along.

David King

We kind up? supply bottleneck component of could supply chain each of into any that is cause got there could a some imbalance that year, hold or key component a kind things

Tim Jenks

a -- is Well, every There in about Essentially XX,XXX the is yes. a key every component key and of sub component every answer them. component is in component module. are is

Beth Eby

a glue widget, problems. if or you have or you're can to some nail So, going

Tim Jenks

multiple tried most a And same we to So a buy, we causes we have the one one. have one you have we two are -- small there's broadly and for oftentimes, is that know, -- a at speaking that suppliers there but things rate, problem. large issues, the large if to unable produce

-- sole being multiple pull on one, problem. a time. also the we and that companies at same if has larger the And a when a go one pulled us smaller on is the be by causes may a one smaller supplier, problem, someone If

that to this up that part ordinance, and public daily global how the public -- of three takes they'll health just a chain it reality be later. different spell had really health Others, COVID with since some in it's cases and requirements they'll days few shut down daily it's we've and weeks. So, has conversation local supply vendors we they'll back have our a learned that been

And full every varies it it widely. requires So, our attention day.

Operator

our Diffely Tom D.A. question from comes And of Davidson. next

Tom Diffely

Yes, good afternoon.

of follow-on I had has had last kind R&D labs, those if projects? was wondering limit impact -- to you First line, COVID on your the in an

Tim Jenks

about impact. a R&D world. I'll Well, couple locations have has the way, in an had And several comment it places in we

Canada, and have We we U.S., Wuhan. R&D China have Japan, R&D we Shenzhen have the and in R&D China, in both in in

colleagues the a they've with earliest at most the and certainly in they're said, job. impact running All back was impact all done our office, they're strong, and the Wuhan. that great So,

a By the world collaborative same way. token, done is R&D the around in generally

it to is the little a can organization late, others pick some bit when up So one extent.

to we've able continued flexible we've that. we be the sure done. had get So, in But pretty can job making that and innovative to do that to

far, worked well. it's out So

Tom Diffely

as as center. think then COVID the goes, that that to actually far And Okay. coherent the -- only you plans accelerated has be to you're data data scan that center the seeing

Tim Jenks

late. No, to is I need there the that very a accurate think there is rate. talked with statement, is bandwidth in for capacity, I This baud are technology good very, are is coherent And leveraging channels a of wider ways a but higher there And of this about. things that C++ these more do spectrum, having that's running don't an example, think deal increasing with capacity. which bandwidth

I way modulation. dealing with a having that That's it. order higher said a of is way that efficient, it that's actually of with dealing

All pure we of these which lasers, supplies. very require

So, the suits the that's data trend to that considerable coherent topic technology, of center but the actually takes picture adopting of coherent think big increase a ways certainly our of I NeoPhotonics, capacity, in more general technology using time. strong

Tom Diffely

color. appreciate Thank Okay, the you.

Operator

Our Ryan next from Koontz question comes Securities. of Rosenblatt

Tim Jenks

Ryan. Hi

Ryan Koontz

on the for quarter transparency thanks business. Congrats strong Thanks. and in the

Tim Jenks

you. Thank

Ryan Koontz

and of impacted CR, upcoming the from that's expect to do lot kind market given disruption the Given players work handful of there. buyers there's fulfillment model DCI of you different the a a

all optics You suppliers, together. DSP the have the of the coming kind guys, systems guys,

Tim Jenks

what industry Well, oftentimes each question. chain. a that's might a there's the level and competitors you other level every the, at global million industry call food of suppliers The and of $XXX are also is good collaboration

think I couple there to consider. are things a

the there and fact ultimate the the are world, players that preponderance cloud a is the of is, in world data that center dozen demand. one around First are that

vast we make dozen now, are true network companies By the that that the a majority same the with same equipment of that the right There is up supply. the token, industry.

incumbent and with it's products design win technical opportunities. technology launch production opportunities people capability --- new design to trying to So, compete your those volume and on for

next how to will the crystal be playing for enough several will out say quarters. that precisely however. ball isn't end think up, it quite I XXXZR over My market the clear

Operator

time this for turn time back at remarks. call of any are additional we now for the out questions. Tim closing over to And We'll

Tim Jenks

We of everyone Thank progress, and for especially of employees suppliers in today drive our in dialing you interest for John. NeoPhotonics. work appreciate much you our thank you, your and Thank to very environment. the safe. future look We'll the a and light meeting updating Have will in the stay evening. with of shareholders you good in other current on to side again Everyone the forward pandemic. of the diligent

Operator

gentlemen, NeoPhotonics, On you appreciate that Please participation. conclude may behalf and do have does at call. this a great time, we weekend. of our disconnect. And Ladies your

Neophotonics (NPTN) 30 Apr 202020 Q1 Earnings call transcript