Applied Optoelectronics, Inc.

Good day, and welcome to the Applied Opto-Electronics Third Quarter 2024 Financial Results Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's remarks, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your touch-tone phone. To withdraw your question, please press star, then two. Please note this event is being recorded. I would now like to turn the conference over to Cassidy Patterson, Investor Relations for AOI. Mrs. Patterson, you may begin.

Thank you. I'm Cassidy Patterson, Investor Relations for Applied Optoelectronics. I'm pleased to welcome you to AOI's third quarter 2024 financial results conference call. After the market closed today, AOI issued a press release announcing its third quarter 2024 financial financial results and provided its outlook for the fourth quarter of 2024. 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 2024. 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, levels of activity, performance or achievement 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, potentially, or thinks, or by the negative of those terms or 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 its products into new markets and customer responses to its innovations, as well as statements regarding the company's outlook for the fourth quarter of 2024. Except as required by law, AOI assumes no obligation to update these 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 businesses are set forth in the Risk Factor section of AOI's report on file with the SEC, including the company's annual report on Form 10-K and quarterly reports on Form 10-Q. 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 the company's earnings press release that is available on AOI's website. Before moving to the financial results, I'd like to note that AOI management is attending the Needham Virtual Security Networking and Communications Conference on November 19th, the Roth 13th Annual Technology Event on November 20th in New York, the Raymond James TMT and Consumer Conference on December 10th in New York, and Northam's Virtual Growth Conference on December 12th. We'd like to note that the date of AOI's fourth quarter and full year 2024 earnings call is currently scheduled for February 26, 2025. Now I'd like to turn the call over to Dr. Thompson Lin, AOI's founder, chairman, and CEO. Thompson?

Thank you, Cassidy, and thank you for joining our call today. We had a solid third quarter performance as we ran up production capacity to meet our customer rollout schedules. We recorded strong double-digit sequential growth in our data center business, driven by new wins for our 400G products, while our CATV business more than tripled from the second quarter as our customers actively transitioned to new architectures. In the third quarter, we delivered revenue of $65.2 million, which was a high end of our guidance range of $60 million to $66 million. We recorded non-GAAP gross margin of 25%, which was in line with our guidance range of 24% to 26%. Our non-GAAP loss per share of 21 cents was larger than expected, and above our guidance range, our loss of 14 cents to 20 cents per share due primarily to accelerate R&D spending due to greater than anticipated new customer requests, especially in our data center business, where we saw notable interest in our 1.6 terabit transceivers. Total revenue for our data center products of $40.9 million was down 16% year-over-year, but up 90% sequentially. Revenue for our warranty products decreased 24% year-over-year, while revenue for our 400G products increased 114% in the same period. We are pleased to report that we have begun to receive initial orders for 400G products from another large, high-scale customer, and we are very excited about this new customer interaction. We have already begun shipment on these relatively small initial orders. We expect additional orders from this customer in this quarter and into 2025 for both 400G and 800G products. Total revenue in our CATV segment was $20.9 million, which was up 104% year-over-year and lost 260% sequentially, largely driven by shipment of our 1.8 GHz amplifiers for our major MSO customers. As we have discussed on our prior earning calls, our MSO customers are in the process of transition from DOSIS 3.1 to DOSIS 4.0. This initial ramp in CATV sales in Q3 was in line with our expectations, and we continue to expect additional growth as MSO upgrades increase in intensity next year. With that, I will turn the call over to Stephan to review the details of our Q3 performance and our report for Q4. Stephan.