Applied Optoelectronics, Inc.

Good afternoon. I will be your conference operator. At this time, I would like to welcome everyone to Applied Optoelectronics third quarter 2023 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. To ask a question, you may press star then one on your touchtone phone. To withdraw your question, please press star, then two. Please note, this event is being recorded. I will now turn the call over to Lindsay Savarese, Investor Relations for AOI. Ms. Savarese, you may begin.

Thank you. I'm Lindsay Savarese, Investor Relations for Applied Optoelectronics. I am pleased to welcome you to AOI's third quarter, 2023 Financial Results Conference Call. After the market closed today, AOI issued a press release announcing its third quarter 2023 financial results and provided its outlook for the fourth quarter of 2023. 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 and will be archived for one year. Joining us on today's call is Dr. Thompson Lin, AOI's founder, chairman, and CEO, and Dr. Stephan Murray, AOI's chief financial officer and chief strategy officer. Thompson will give an overview of AOI's Q3 results, and Stephan will provide financial details and the outlook for the fourth quarter of 2023. A question and answer session will follow our prepared remarks. Before we begin, I would like to remind you to review AOI safe harbor statements. 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, levels of activity, performance, or achievements of the company or its industry to differ materially from those expressed or implied in such forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as believes, forecasts, anticipates, estimates, suggests, intends, predicts, expects, plans, may, should, could, would, will, potential, or thinks, or by the negative of those terms or other similar expressions that convey uncertainty of future events or outcomes. The company has based these forward-looking statements on its current expectations, assumptions, estimates, and projections. While the company believes these expectations, assumptions, estimates, and projections are reasonable, such forward-looking statements are only predictions and involve known and unknown risks and uncertainties, many of which are beyond the company's control. 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 innovations, as well as statements regarding the company's outlook for the fourth quarter of 2023. Except 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, 2022, and the company's quarterly report on Form 10-Q for the quarter ended September 30, 2023. Also, all financial results and other financial measures 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 fourth quarter on full year earnings call is currently scheduled for February 22nd, 2024. Now I would like to turn the call over to Dr. Thompson Lin, Applied Optoelectronics, Founder, Chairman, and CEO. Thompson?

Thank you, Lindsay, and thank you for joining our call today. Our third quarter revenue and non-gov EPS were in line with our expectations. Oil oil market growth margin was better than our expectations. We are pleased by the continued progress we have made on improving our growth margin and by the continuous strong growth we saw for our 100G and 400G products in our data center business during Q3. The combination of revenue growth and improving growth margin allow us to generate $3 million in adjusted EBITDA during the quarter. During the third quarter, we delivered revenue of $62.5 million, which was within our guidance range of $60 million to $66 million. We delivered non-GAAP gross margin of 32.5% above our guidance range of 29.5% to 31%. by our favorable product mix shift and contribution from revenue recognized as part of our non-recurring revenue from Microsoft. Online GAAP loss per share was $0.05, which was within our guidance range of a loss of $0.06 to earning of $0.01. Total revenue in our CATB segment was $10.3 million, down 67% year-over-year and up 10% sequentially, in line with our expectations. Total revenue for all data center products of $48.8 million, more than doubled year-over-year and increased 77% sequentially, largely due to increased demand for our 100G and 400G products. As we continue to see the run-up of our 400G products, revenue for our 100G products nearly tripled year over year, while revenue for our 400G products increased more than 10 times in the same period. With that, I will turn the call over to Stephen to review the details of our Q3 performance and outlook for Q4. Stephen.