NPTN - Earnings call transcript Q3 2020

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Operator

Good day. Welcome to the NeoPhotonics Third 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’d now like to turn the call over to Erica Mannion at Sapphire Investor Relations. ahead. go Please

Erica Mannion

you results Thank outlook us discuss to the Good the for third operating XXXX. for quarter and quarter NeoPhotonics fourth afternoon. of joining of for XXXX

our the the Chairman discussions call the release provide accordance the financial and measures non-GAAP Officer; On statements during Beth balance Financial for the The a will for noted. amounts projections, today contained Relations the begin and Chief and information, of and related then Tim non-GAAP section in filed for Eby, Material to future market NeoPhotonics are cause business trends materially. and X-K, technology GAAP outlook GAAP. are the may prepared to measures company’s call in rights Various subsequent review reconciliation today Tim be income be economic for historical with will and copyright statements provided with of unless These and CEO, management’s a inventory Yuen, the demand, of growth a all levels, is regarding Chief the include call, development, this considered questions. or are website. webcast and in call providing Wupen SEC involve and Wupen quarter, found company’s differ uncertainties statements and other Certain press the accordance financial technologies measures a financial could are Product products, actual results and and product discussion third results not of not will open reserved. These customer GAAP or results with sheet that press the substitute of the facts, Officer. results, company’s including with Jenks, business on forward-looking which otherwise to statement XXXX. than release in relevant can being speed will the superior a financial and fourth revenue, quarter quarter performance and in Beth of are in of risks third for products. percentages sole summary measures financial products. NeoPhotonics, before with non-GAAP industry events. of conference and certain and all prepared Investor then and Form not be highest statements include drivers The factors and provide property in

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

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

Tim Jenks

Thank you, afternoon. Erica and good

of in to same Department Our time, highest strong BIS global the very with restrictions pandemic the and in the of revised Huawei. August the especially At from business speeds. challenges at the the dealing we're QX with pertaining was Commerce

Our million, third year-over-year. revenue was quarter up $XXX XX%

our Our increases wins, new for and non-GAAP prior. five increase are solutions a speed broad represents customers. backlog, we share with range percentage gross seeing margins time as points year in NeoPhotonics exciting over of customers, continued to and an resulting highest the both is an in expand reaching This historical volumes XX%, gains higher customers design from of which distance

XXXX. longer products of accelerate coherent use a revenue that distance ramp We indicate Further, in points coming of cases growth will expect we new module module coming Each XXX-gigabit with acceleration XXXX. have new our our to in these products XXXZR+ growth. online

again is current year look of review this our nine our business excluding months XXX-gigabit excluding we historically But XXX-gigabit at to each heats revenue expanded XX% take be of group performance the approximately it In we without XXX-gigabit are this Keeping and this, and Huawei nine in high-speed of in will and was our shipped XXXX, we above back continue and step first business of first our market going developments, the growth XX%. were up, year to at doubling products at Note forward. months expect look outline let's our the Huawei. and was through above year-on-year mind speeds. our gaining from business that would an simultaneously customers. largest accelerating revenue customer our Further growth QX. we that this a for XXX-gigabit highest thought two of the revenue Given above the increasing Huawei. quarter, helpful as strategy share throughout market ports XX%. beyond number year-on-year has and our the And being XXXX, been the In see

distance and in growth for growth is With our our as $XX customer leveraging XX% and In XXX-gigabit which is two equipment strong at sequential base. quarter, without expected, customers. QX XX% building faster And and XXX-gigabit in considerably providing products companies XX% for customer. the We of our accelerating and systems, these with second speed their we products. are the and outlook customers. highest expanded we a we over revenue the favorable NeoPhotonics terms are industry-leading added above quarter in the midpoint, a of reported third our our products for million Huawei higher trends a fourth in Again believe growth

XX% said on have year we For next XX% see believe basis. over same will to the the the growth longer revenue that term, we we

Our coherent QX since been goal. in ago. has outlook shows products leader progress for high-speed that face a into NeoPhotonics growth entry a to sequential decade our optics QX toward good

speed and speed over highest and over are the receivers the modulators provide life primary tunable bandwidth highest rate used We of in applications, baud the distance ultra-pure interconnects. supplier we for lasers distance highest

receivers XXX-gigabit, been high-speed for we XXXZR. introducing new have including For applications XXX-gig and new the products, three the modulators lasers, steadily modular coherent last several years, and highest-speed at plus

in by cloud are highest fastest of over These especially and second ones As products demand the growth accelerating industry, demand deployments profitability. gigabits strong, driven for beyond, center share a XXX NeoPhotonics data highest-speed adoption and and market result, and growth our very driving with deployments they've of market is for distance. been speed areas and requiring related the among the gains per and

Our strategy supporting telecom solutions center by XXXZR for by is over at new XXXZR+ starting providers highest modules above our to customers the to ramping XXX grow our distance coherent and speed and business in data and the equipment gigabits expand business XXXX. and hyperscale cloud rapidly

highest distance simultaneously our a that components designed networks that in Our speed preparations talented long in in and products work the been used are who the the specializes and engineered highest performance to together with highest employees today. by operate have make for this making. the NeoPhotonics products over world, time our at speeds around deliver

the in of world their leading all high-speed using around equipment systems. For the producers network NeoPhotonics flagship products

they these Over developed all highest-speed and the Scaled expand. am acceleration XXX-gigabit for our beginning. of depreciation last is only achieved. chassis-based their manufacturing what production methods have margins utilization, I XXX-gigabit our advanced have our proud steadily of components three for for the above products. team our very increasing seeing costs our while years, and The we and above reducing manufacturing systems

continues opportunity higher on for well are products market module to increasingly to we top wave capture applications. including for growth. and next and to XXXZR XXX-gig is of XXX-gig, Layered speeds the As the positioned this XXXZR+ higher XXX-gigabit of this our and coherent move

double customer in beyond data manufacturer providers metro importance market, adopters center, center us of leader market. equipment of a be our will volume Cloud in given the addressable early launch including applications. our for hyperscale, XXXZR+ base. will data XXXZR be network will are We and interconnect effectively new the the which customers and this hyperscale modules, These customers

we five-year Given stream through expect By our coherent design XXX-gigabit our further and long-term to supporting industry wins, seeing compound is see we looking Huawei port highest grow into business hyperscale XX% to at grow next year. modules prospects. the to the speeds, at over an forecast growth, rate of from an including customer our revenue XXXZR are annual growth rate the at additional XX% without our sold mid-XXXX, forecasted and XXXX, to growth forward above XXXZR being growth customers, XX%

we Beyond typically topline higher-than-average highest-speed products. our from growth, margins gross achieve

at call our mix, of believe become It's opportunities increasing we products trend exciting margins. we growth time we our due the I these will revenue in the with more such Product NeoPhotonics and that of an map driving are to detail our for adoption. a see you the As an road favorable Chief Yuen, face. our our provide fraction to Dr. XXX-gigabit turn Officer to now will Wupen trends above over products and

Wupen Yuen

good and afternoon. Tim you, Thank

to Tim As in as the position top in former are driving growth our NeoPhotonics ZR of current that components XX-gigabaud a mid-XXXX. lasers is production to outlined ramp accelerated On explaining strong modules growth. and in deliver expect beginning we of of our growth, strategy,

routers and small With the first ups providers demonstrate as and rates technology. vendor to traditional of link products promises ZR enabling directly the in cloud technologies, perform adoption be to enables real data increase at and switches OSFP new enable capability XXXZR cases. modules module successfully QSFP-DD to Our low and in casting thereby operators factors, very interfaces changers, coherent module and savings by and are equipment, power plugged XXX-gig This into rates significant network package them driving realize system state-of-the-art form DWDM equipment. use former integrated been in the interoperability major vertically our the and expanding has laser that to silicon NeoPhotonics leading with rapid XXXZR photonics to the the adoption both game

and our in-house leading silicon our integration. leverage solutions XXXZR capability high-performing Our laser photonics

collaboration XXXZR the lead of customers cloud XXXX. our We expect the quarter at to first complete by

We for cloud data expect metro center to initial interconnects. be providers volume with applications for major XXXZR

emerge NeoPhotonics, model XG However market module distance backhaul opportunity the distances, to high-speed an It as distance use components. accessible our XXXZR+ market-leading is position XXXZR+ to adds cases in segments important market it overall higher to interconnects. edge data natural high with existing and with expand into also is for that longer ASP interconnects note and for over content center our there solutions longer use, internal capability regional XXXZR for new beyond

will will XXXZR+ growth our a third that expect that begin provide stream yet ramp modules to XXXX. in revenue We

operate multiplexing shapes including we line unique open and equipment including channel These of each have are these also over which new to channel monitoring systems curability and products demultiplexing high-performance applications, to require providers. line and including systems. Additionally, leading that cloud systems DWDM XXXZR supplier filter spacings high-speed XXXZR+ a specific

our held a in technology additional to in technology the working, Relations section and learning key of Information second intelligence or which trends I high-speed remains cloud due NeoPhotonics we our on to detailing call from enabled from services. of an to XG solutions. architecture. webinar presentations increases demand to quarter, available key over XXXZR distance Investor that change by whether And it'd discussed Beth September webinars website. artificial capacity these we deployment Rapidly our conducted machine investors growing the differentiation webinar the in of leading will remote at During trends and be driver business, With continues the wireless the over Eby. CFO the fundamental turn global high-speed be bandwidth for edge, rollouts. we

Beth Eby

FX of our revenue in and or in share Wupen of In These results customers $X.X partially per strong were gross was quarter. operating of three XX.X% the non-GAAP had you, EPS $X.XX of Huawei customers the adverse of by good revised profit $X.XX. revenue $X.X at all million, QX a outlook. non-GAAP with in quarter resulting $XXX.X and and four impact XX% Thank more afternoon. our million end of margin an high detail, non-GAAP next QX XX%. a of were offset We XX% QX was million

million XX was Within in last on X.X% cost Other product to gross impact warranty $X.X this $X.XX Total Appreciation range. early just XX.X% and Chinese minor was quarter of non-GAAP XX.X% of the the driver underutilization coming mix. the slightly operating charges sales share. QX up in X.X% -- non-GAAP of exchange profit on or for our high of XX%, model approximately slightly of relative and other under company. programs. margin foreign million was $X.X were the third U.S. from quarter million were our end quarter reflecting continued operating strong lower Non-GAAP reduction expected expense cost than of operating dollar throughout quarter at primary approximately product the per the the yuan, favorable margins Our execution $XX.X of charges. a third for points or of was X of point a the of execution

yuan. the revaluation the sheet loss to of items is FX the As exchange balance the of a of operations quarter rate. our end reminder the functional is currency non-cash China China The

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

in line had and estimates On with for revenue that quarter a announced the result, restrictions Commerce on October net the we discussion our X, non-GAAP detailed. Department we we its affiliates Huawei. third the results. As would third from income we the a review of manage the the increased noted results, I'll expanded I $X.X statement million. At that and was Huawei time out income have of GAAP quarter close with without of just for contributions quarter business our that my

million million less related release. the now than to material stated As we include million, write-down infrastructure of were Charges $XX.X XXXX. as estimated The Inventory million million. production our write-downs for taken total $XX.X of and our our million capacity equipment demand and QX severance GAAP result, expected. align of charges incorporated lower expected a less be levels. than charges and to have actions This cancellation with charges press are to through results the $X.X in is $X.X on action in $X.X of estimate expected $X.X $X.X million

margin acquisition-related mentioned of on $X.X gross of million. Operating early and impact $XX were compensation loss which losses lower than expense the of including of approximately amortization million expense the restructuring Operating was quarter XX.X%. $X.X and million $X.X I spending of was the of execution million, for other of was the intangibles $X.X and charges third just expected includes Net quarter million million other costs. million. reductions. the quarter stock-based $X.X for related $X.X Third charges

balance the sheet. to Turning

for to $XX cash. we million of cash million. operations investments on and Our improve down level the and we XXXZR and million CapEx that GBaud spent was cash to to XXXZR+ puts in $X of continued restricted XX- paid million see and lasers growth position and debt. $XXX Cash We position continue $X XX- to short-term from in cash invest good a This components modules. us

Harbor discusses uncertainties of outlook would for causing Before public revenue like I Safe included press risks fourth XXXX, the filings could Statement and and and the quarter our actual that SEC discuss our remind the affect from materially the results in our $XX earnings with allows to current our on XX- everyone performance I that of our of future realized restructuring to Within that of we lasers continue revenue for fully differ forward-looking and growth the will our to XXXG GBaud in implemented based drivers when business invest The including breakeven modules. at we components mix. statements. million this, release

For be no QX, QX, excluding our Huawei. there $XX revenue Huawei In from will was revenue million.

do a drive point products and in of growth reductions XXXG margin for beyond underutilization offset revenue this We reflects increase growth in expense NRE Gross continued higher expect rapid for payment continued an developments. from the and volumes to therefore investment to expect in We by forward. spending operating planned see lower charges. QX as are XXXZR

be Lastly, our with the agreement quarter, Optoelectronics. gain signed our This will in we to which GAAP a million of settlement result $X.X an to end lawsuits the of QX, in APAT settle will included subsequent in results.

to range non-GAAP wins major trends as XX%; company's NeoPhotonics growth the favor. the the to range in to move well to are XX%; to margins design delivering are: gross the business. profitability. across industry million revenue $XX loss; we XXXX numbers of and strength range the that a increasing In continuing of December trend XXXZR+ XX% a above basic per share optimistic summary, be in the earnings the With These and opportunities year-over-year and quarter loss million that XXXZR QX the reflective Given range earnings XXXG reflects expectations per the as of base loss remain range the XXXX in our $XX We'll for non-GAAP XX.X our GAAP $X.XX of beyond, revenue shares. the $X.XX margins $X.XX gross million; in of in and a to XX% GAAP share in of diluted equipment manufacturers in in and momentum diluted network loss. of approximately $X.XX of in continue

of to that QX For objective. toward the the The for good to our QX progress we longer-term, growth XX% from said midpoint have over next XX% excluding the that to XX% outlook expect growth see revenue revenue year we is Huawei.

and we get operating non-GAAP QX to XXXX. profit addition, expect to in GAAP In of back in QX

We work that customer financial ask beyond. will in to we questions. open up growth concludes expanded the for shown can years, James? can and line both I Over revenue and transitions. base through two have to This continue an drive our formal comments. now the last we the we And believe operator XXXX

Operator

Thank you. [Operator question Instructions] today Shannon And we'll Craig-Hallum. our with take first from Richard

Beth Eby

Richard. Hi,

Richard Shannon

both in on we rate Hi, average Beth. the margins, fourth getting little Thanks my to the a first Huawei kind bit one for questions. suggest than think above of Hi, right thought are is here guys. gross I XX% of the seems kind gross mix higher through how fairly If good guidance for has and are Huawei look normally guess, healthy that it's been fall of on rate antithetical would you? I process I my I down taking guess calculations which, It quarter. up a a my and of the little margins see pricing. here. the on at

understand gross you're at So wonder help going out how should forward? kind if you the then dynamics here? settling we think could us about Why of XX%, margin it

Beth Eby

of you're don't wasn't XX% on expect an charges, they expected is not volume a of we level, that we from get customer, both a much and having see hugely factories. the little in And China a product-to-product losing Japan as our discount. chunk our one from seeing is fair you are a underutilization quarter. That would more in they then, get what on bit They to biggest were a customer product different Huawei. of margin discounts, our what the So, -- increase than but from it other in biggest seeing customers

Richard Shannon

progression looking quarter. the My That is here follow-on fourth kind is here at past helpful. revenue of question your Okay.

that outside getting third XX% fourth of much point? expect Huawei, to the Huawei as rate XX% in in year to How think, that to XX% your customers growth get pro said Obviously, dynamics. ZR this gaining first next track, pricing on is excluding in the was here of and I to that much quarter. that and over so the to we quarter? with get some forma how with product pro rollouts forma quarter-on-quarter normal to see the the profitability you share that also of But we'd dependent quarter

Tim Jenks

Tim. it’s Richard,

QX shorter a First of as seasonality. said that all, normally to reflecting Year, we China New with QX see, expect the then well growth do as is normal we've expect QX. What sequential And XX% we to pricing.

have expect dependent we’ll customers. then ramping seasonality QX, this in it's our on not among to case half grow. between is shifts So We see that lead And normal then would second normal the XXXZR, particularly expect we year. continue to year, as the That to an acceleration. and would share of and the we're

Richard Shannon

Okay, great. Thank you.

Beth Eby

Richard. Thanks,

Operator

we'll from Next, Capital Tim hear Savageaux Northland with Markets.

Tim Jenks

Hi, Tim.

Beth Eby

Tim. Hey,

Tim Savageaux

on Hi. conclude you've I is OpEx you ZR. could of wonder obviously, operating questions, we And of flat the that despite on described? ZR payment magnitude revenue visibility guess. opportunity? NRE if and try of And and Good you're increased greater couple can net some also in the -- from the referenced focus the keeping And this that. side. you afternoon. A follow-up -- you that and release timing the that looking you some got start it the a of that the looks and like the and expense on I'll to commentary I you're flat, some And, decline that quantify

Beth Eby

ZR on opportunity. comment Wupen the let I'll So

all second this and OpEx, to along. the know the Tim, you this well from first the pushing the we this year have year On of been of half half OpEx

you're is, payments couple to are comfortable are to that's of support the that. in seeing order QX in enough that for a investments the And opportunity there's We we that needed ZR scheduled what NRE were QX. big with continuing do

of about to talk want QX by of We to we're point that those. is, pretty those and about going will QX reduction ZR confidence? $X this million almost we what in to gives by where implementing. Wupen, all opportunity next the have earlier we be much What offset from said press maintained And year. the release us are is the land reductions the quarter you

Wupen Yuen

Yes.

the ramp that delay. do will on any for do more opportunity, nor first we we start On see still we expect reason the but mid-XXXX. ZR And schedule granularity than have the around timing,

So of we still mid-XXXX are early counting XXXZR. ramping on

Tim Savageaux

revenue, reduced responding how Great. kind with And to kind of to Huawei just level update just other or suppliers, reality be, with regard situation, able managing you of I would no you against want not be as revenues stated to their but and assuming what kind won't the allowing the you suppliers CF Lumentum dynamics kind might seeing might on the approaching you suggest to this us you this refocus to zero. on you're then, approach you're of Huawei, of business, maybe bump to but to can and not whether or that there's guys move to of the are share. up various that a conservatively are taking

Tim Jenks

in Yeah. situation that Thanks zero quarter. where say will expect see we said as with more prepared for to guiding a fourth quarter, in our Tim. now have than we'd on it we but the zero. to be Huawei. a did remarks, not We're We cease it's would And revenue reliance

Tim Savageaux

very much. me. And Okay. then one last for Thanks

what are Huawei color that XX% indications if focus sort or ex You of particular any more I further there imagine customer. out had a becomes any customer of generally, -- your I about added geographic -- broadening quarter. or about color you any could a the on talk in But mentioned of product and any if substantially drivers applications wonder geographic how provide and you customer other that? is larger either base

Tim Jenks

the with But said and XX%, real Yes. a gigabits as speed a is our actually customers. is in I The and range it's was year-to-date quarters the three above of up and driver, in business XXX prepared highest that's the the situation remarks XX%. first up

dynamic The are that expect And strong customers quarter XX% other XXX-gig highest don't -- the part that actually growing slowing speed, at having quarter this a rate. third pretty And there with these words, -- XX%, of up frankly. additional at of XXX-gig, through customers quarter to or so partners the we additional would are has quite trends would and is the first quarters an accelerating systems. three it ultimately from in customers, -- XXX-gig, who growth to as each see results The our which important number really are in down rapid we the amount actually XXXX highest well. expect this it's of while to gone the be of second first a revenue up. quarter were In speed directly

So customers I think that have will change bit we Huawei. obviously, Huawei XX% forward. the face of I And zero think the going without or a with

So, that growth I in forward. all above category of for in drivers be will products for and the seeing dynamics helps. that going hope we're who's XXX-gigabit and the that systems

Operator

now from with hear Dave Riley. B. We'll Kang

Tim Jenks

Hi, Dave.

Dave Kang

your XX% question Hi. one in two it it will the customer. Good Thank actually regarding My become is fourth customer? third you. afternoon. over quarter meaning, first your Could number jump number

Tim Jenks

on don't think guidance think but I don't possible, anything to will going customers Dave. we -- provide I is Well, individual we're

Dave Kang

Okay. Fair enough.

any can at you Just which mean, us more market data that color? on customer. tell for is DCI least long-haul metro it just I and more products which

Tim Jenks

Well, the And mid-XXXX, because XXX-gigabit it's modulator highlighted. Wupen because indicated we are and in of because the case, expect start above. as to for the that's all yes, And as XXXZR growth receiver. drivers laser and we've that

XXX-gig by driven is it continue. but -- we the applications and above expect to that and So

Dave Kang

three those my XXX, break how Got they just roughly above. actually is can it. and components follow-up XXX XXX-gig out? and sticking XXX, And split with you Between or XXX-gig

Tim Jenks

systems number is companies because systems it's are see. let's limited, that today emerging. of actually The at just really Well, selling XXX-gig

So that really whole are chassis-based CFPX-DCO, is but it changer to and additive the because the and XXX-gig are both a QSFP-DD couple of products preponderance in those suite. that component the XXXZR systems XXX-gig XXX-gig causing and coherent the said, in and reflects then of in and form XXX-gig introduced have really OSFP products XXX-gigabit But going the revenue another XXX-gig which quarters the significant strong, a advent a the we pretty XXX-gig of was ago. the started that adds of modules and those our introduction a of volume the change. both Wupen factor leverage we is shipping dimension game

a speed for the doubt, moment, to XXX-gig considerably without and So increase these continue the and XXX-gig to the each is products. larger going of trend than XXX-gig. at overall increase But the are revenues

XXXX, use contribution dynamic that just Now of the we in cases do an because think volume, ramping whole to creates for and series that I increasing business. XXXZR is our helps. of a revenue that important hope

Dave Kang

Yes. And may XXX-gig. if on my question actually is I last

So more color how going should Any we these down to optics go go all it or high-speed think sideways? ramping? that? Is about with XXX-gig on

Tim Jenks

Yes.

for dynamic have pressure. about volume the Wupen, to want case. you So – cases is XXX-gig talk you XXX-gig is some increasing and use may price the on

Wupen Yuen

Yes.

or the we less stay more and still So XXXG offer it's expect flat to while. probably workhorse to long-haul a for

years see four a few that you call do cloud. that another three, years edge or will network associated so of into XXXG see the we being penetration the it in see of flat so the we with but And edge later

to And of XXXZR XXXG show the small years. four that to on. think form three So growth will point a in we will in another start drive that factor from up

Dave Kang

Thank it. Got you.

Operator

Leopold James. will from question Raymond Simon Next with come

Mauricio Munoz

Thank you Simon. for for taking Mauricio in This my is question.

hyperscale quantify, continue outside guys wondering, ZR to sell you. It to might the these are the directly that customers seems And Huawei XX% two growth to is just You what by those expectations that of us of in grow some to ZR And of into indicate was mix help big the planning of could mean into of potentially become year. the for suggest – expectations? hyperscale. customers – outside if I the you're you your I Huawei sort XX% XX% last could these

any on see have large Just also any by recently opportunity wondering for sort on of could this you announced as follow-up, XXXX? given the be Thank a if do you of in Inphi risk how or expectations then acquisition And those indication you commitment Marvell. you.

Tim Jenks

So let's in Mauricio. see that a there question lot was

this the in have I our our products, excluding XX% is our in business, quarter, of it Let's third the of we our products. from is said, for start year-over-year. year-to-date, revenue the And of of fact the group the applications above XXX-gigabit and XX% grew XX% as with is business, as revenue XX% matter now that – Huawei, of

to And for expecting. into the seeing so – and the there's a which year lot is course fourth of the of XXXX. then of growth, fourth quarter we in that are to into tailwinds we're end what quarter contributed XX% And sequential going the

ZR guiding next Now I QX, QX – because mid-year, the we see – of year. amount we're expect not fact it The We're about I growth point. we past of what terms. guiding the out XXXZR, half precise We've this seen. second the to to But think would size we've think the start there import year for talked at amount market. would what is some of and of the that remains is be know not the got see that in

compound XX%, compound growth an same have about rate growth five-year rate. revenue In annual period. XX% terms annual We the a it's over five-year

to right from XXX-gig $XXX As going from the market $X.X from years above million billion market now mark out now. for a and about a expands what five

to have that be XXXZR mix systems chassis-based the chassis-based the modules precise on module-based So, the go to products for have we remains launched and or components to but solutions. we that that both strong solutions seen conviction the really components the

of So, all we that. expect to in participate

Now, you deals. about did also recent ask

do closure. recently get important that what's think that think is what to deals time we've I take I to seen

or just mentioned them to to we that's and fine. we so would continue year expect Inphi, for So, would -- the independently operate expect certainly, next you

the of of the So, does the I direct the is which change to I add it the supply helps. more space. don't think longer consolidation that reducing although in lot immediate in in that hope term patterns competitors market in number term, one there's a or

Mauricio Munoz

And helpful. a quick housekeeping item. Pretty Yes. then

three quarter. talked about You if had XX% obviously you quantify XX% And think I at this could of them customers name other two Huawei sales even mentioned. don't please? you the you

Tim Jenks

just that naming as saying to think I how XX% many customers we're No, required do. we're just have. We're just we naming

Mauricio Munoz

Thanks.

Operator

JPMorgan. Chatterjee from hear now We'll Samik with

Joe Cardoso

And relative apologies question for on previous yes, Hi, this just And the Samik. this actually following Huawei. hi my is the guys for but the that first Joe on Joe Have beating horse question actually dead here, way. all? is on so a up can't is I -- has on maybe that it to ship restrictions shipping in completed to Huawei? at your diligence you And the you if been ask to conclusion due different

Tim Jenks

there's answer we are the on software, of of an to different of U.S. The use considerable exclusively. the way software. restrictions restrictions And technology dimensions. and ongoing that but to couple amount to the use and not technology has a think pertain a evaluation is one -- the I U.S. have defined,

do actually foreign We or amount Most made have U.S. some substantial products. of software. which technology use of

that, there don't any we guiding beyond how that would about revenue. very is not think we're quarter done. be So, for the certainly others clear is the business I won't I it's Joe zero. now fourth but anything or for And ongoing, describe But Huawei

Joe Cardoso

particularly like customers COVID XX progress No. impact on in first Got not reported to it. ago? to just guys Understood. business, in you is high-speed to they seen moderation as my curious And obviously, And customers products and But into quarter days morning. just of growth second the relative days you products. in excluding just are the have NeoPhotonics physically here, or some Huawei growth XX then to products. this hear any ago highlighted through had just question a your month guys things trialing able the XQ you to to highlighting strong deploy relative Lumentum relatively related telecom or relative And thoughts slowdown obviously

Tim Jenks

That's existing deployments of are new element Yes, as higher more important the ramping of -- to essentially an opposed systems. there systems.

corollary with rates respect versus is see expectation systems. to on slowdown the there You deployment prior that. some is expectation that do new And

what bag; interconnect therefore, mixed strong. been mixture quite bit the data it's see two. those that a it's it's -- a telecom for center of a And helps. for we hope Now, I of is

Joe Cardoso

Thank does. guys. you it your No, insight for

Operator

[Operator Instructions] Richard from with a have Shannon follow-up We Craig-Hallum.

Richard Shannon

have one for here, one more quick dropping missed couple hi, minutes, But customers I we in may with quarter? on question a into two I'd guess I out see sure of -- we this. not the quick two I'm if ones a XX% look Huawei could fourth quarter Hi. off the so me. or for stepped two

Tim Jenks

got wins volumes traction the think in we've strong the and as I indicated prepared in -- remarks, Yes, ramps. I

how outlook is I'll on have what say Huawei, won't we precise but lose think give but I strong many So customers. other we we'll customers, several

by the the end of see how we'll plays quarter. it So out

Richard Shannon

Okay. that but you my first did Wupen's remarks that it say hear Did first Fair the And in I correctly? if quarter. vendor or I enough. Tim ZR, with was qualify to follow-on hear your in regarding you're expecting a cloud

Tim Jenks

in well hyperscale we quarter the to expect early are do expect -- the our do first qualifications What we adopters. that to going guys was and first the cloud No. do be we said

Richard Shannon

Okay.

first starting the assume the are middle the quarter. and got in year to the of finish... ramp So I they qualifications would in

Tim Jenks

the we prepared big customers expect Qualification XXXX, quarter started but And of we would quarter QX that expect next the -- did to be we in I say think but by remarks, complete to -- in first XXXX. our year. first of of done with would in cloud Wupen the

Richard Shannon

say care ZR guess Do to be or that shipping year? in you you end share expect volume of you customers a many have by on next the to how

Tim Jenks

say Well just cheek would it's I no it. speculate that. hope to that underestimate I'm But I'll going in tongue somewhat not I

Richard Shannon

you all That's Okay. me, shot. for Probably you. Thank a Tim. give

Tim Jenks

Richard. you, Thank

Operator

We Tom a D.A. question with Davidson. Diffely have from

Tom Diffely

structure? more quarters, do you revenue When cost look at your Or prospects the that getting require in you Yes. customers? the of to need to just getting few you're Good back growth profitability with the from did deal afternoon. non-Huawei

Beth Eby

as of in operating Huawei. at non-GAAP said to In we look -- we to able years. will profit the expect But QX. over to as been -- are we always profitability couple no We last cost get have structure we without be back

Tom Diffely

in new issue? fourth level Okay. a or Great. then increased onetime for And the higher a is that R&D quarter. of about you a Is comment made that XXXZR just spending spending

Beth Eby

a that's XXXZR. No, onetime NRE payment for

Tom Diffely

Okay. Great. That was you. it. Thank

Operator

That question-and-answer today's will conclude session.

Tim Jenks

and We forward are with meeting Very in everyone you our good again thank evening. for updating and today shareholders in good. Thank you the and interest dialing joining able. a future for in. do Have we look to for call NeoPhotonics. James, your you, in person once

Operator

Thank participation. conclude today's will your conference. you That for

disconnect. You may now

Neophotonics (NPTN) 2 Nov 202020 Q3 Earnings call transcript