Applied Optoelectronics, Inc.

Good afternoon. I will be your conference operator. And at this time, I would like to welcome everyone to the Applied Optoelectronics fourth quarter and full year 2021 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to enter the queue, you may press star then one. Should you require assistance, please press star then zero to reach the operator. Please note that this call is being recorded. I would now like to turn the conference over to Cassidy Fuller, Investor Relations for AOI. Ms. Fuller, you may begin.

Thank you. I'm Cassidy Fuller, Investor Relations for Applied Optoelectronics, and I am pleased to welcome you to AOI's fourth quarter and full year 2021 financial results conference call. After the market closed today, AOI issued a press release announcing its fourth quarter and full year 2021 financial results. and provided its outlook for the first quarter of 2022. The release is also available on the company's website at ao-inc.com. This call is being recorded and webcast live. A link to the recording can be found on the investor relations section of the AOI website. It will be archived for one year. Joining us on today's call are Dr. Thompson Lin, AOI founder, chairman, and CEO, and Dr. Stephen Murray, AOI's Chief Financial Officer and Chief Strategy Officer. Thompson will give an overview of AOI's Q4 results, and Stephan will provide financial details in the outlook for the first quarter of 2022. A question and answer session will follow our prepared remarks. Before we begin, I'd like to remind you to review AOI's Safe Harbor Statement. On today's call, management will make forward-looking statements. These forward-looking statements involve risks and uncertainties, as well as assumptions and current expectations, which could cause the company's actual results to differ materially from those anticipated in such forward-looking statements. In some cases, you can identify forward-looking statements by terminology, such as believes, anticipates, estimates, intends, predicts, expects, plans, may, should, could, would, will, or thinks. and by other similar expressions that may convey uncertainty of future events or outcomes. Forward-looking statements also include statements regarding management's beliefs and expectations related to the expansion of the reach of our products into new markets and customer responses to our innovation, as well as statements regarding the company's outlook for the first quarter of 2022. Accept as required by law we assume no obligation to update forward-looking statements for any reason after the date of this earnings call to conform these statements to actual results or to changes in the company's expectations. More information about other risks that may impact the company's business are set forth in the risk factor section of the company's reports on file with the SEC, including the company's annual report on Form 10-K for the year ended December 31, 2020. Also, All financials discussed today are on a non-GAAP basis, unless specifically noted otherwise. Non-GAAP financial measures are not intended to be considered in isolation or as a substitute for results prepared in accordance with GAAP. A reconciliation between our GAAP and non-GAAP measures, as well as a discussion of why we present non-GAAP financial measures, are included in our earnings press release that is available on our website. I'd like to note the date of our first quarter 2022 earnings call. It's currently scheduled for May 5th, 2022. Now, I'd like to turn the call over to Dr. Thompson Lin, Applied Optoelectronics founder, chairman, and CEO. Thompson?

Thank you, Cassidy, and thank you for joining our call today. Turning to the first quarter, we deliver labeling and downgrade EPS in line with our expectations and close margin below our expectations. mostly due to unfavorable product mix and increased costs from un-indispensable supply chain and logistic expenses. During the quarter, we continue to see strong demand in the CATV market and improving conditions in the data center market. We achieved total revenue for the first quarter of $54.4 million, which increased 3.1% compared to the first quarter of 2020 and increased 2.1% sequentially. Total revenue in our CATV segment of $24.9 million was up 56.4% year-over-year and lost 7.9% sequentially. The overall CATV demand environment remains strong and we currently have an unprecedented order backlog extended into Q4 of this year. We believe the conditions in our CATV market are likely to remain highly favorable into 2023 because our products are currently being used in network upgrade projects by the three largest CATV MSOs in the US, along with other smaller operators. Total revenue for our data center product of $25.2 million decreased 23.1% year-over-year and increased 5.3% sequentially. The sequential growth is encouraged as inventory level with our largest data center customer appear to have returned to normal level and delivery against new demand from this customer have resumed. In addition to our large data center customers, we saw a significant order increase from several of our new data center customers. Some of these increases were offset with an indisputable decline in 40G revenue, indicating that the mix continued to shift to 100G. In addition, I'm very pleased to report that during the quarter we received our fourth volume orders for 400G products from two different data center customers. This represents the accumulation of a multi-year qualification effort with these customers. And we believe this initial order will lead to further significant order in the future as 400G gradually surpasses 100G as a dominant data array within large data centers. During the fourth quarter, we skewed four design wins among four customers. Two of these design wins were with TerraCenter customers and two were with TerraCom customers. One of the TerraCenter wins was with an existing TerraCenter customer for our 4 energy products. This customer is currently purchasing one energy product from AOI and has pressed an initial volume order for its early 400G deployments. With that, I will turn the call over to Stephen to review the details of our Q4 performance and our Q1. Stephen. Thank you, Thompson.