2/26/2025

speaker
Conference Operator
Call Operator

Good afternoon. I will be your conference operator. At this time, I would like to welcome everyone to Applied Optoelectronics' fourth quarter and full year 2024 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 telephone keypad. To withdraw your question, please press star then two. Please note that this call is being recorded. I would now like to turn the call over to Lindsay Savarese, Investor Relations for AOI. Ms. Savarese, you may begin.

speaker
Lindsay Savarese
Investor Relations, Applied Optoelectronics

Thank you. I'm Lindsay Savarese, Investor Relations for Applied Optoelectronics. I am pleased to welcome you to AOI's fourth quarter and full year 2024 Financial Results Conference call. After the market closed today, AOI issued a press release announcing its fourth quarter and full year 2024 financial results and provided its outlook for the first quarter of 2025. 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 Q4 results, and Stephan will provide financial details and the outlook for the first quarter of 2025. The question and answer session will follow our prepared remarks. Before we begin, I would 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 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 its products into new markets and customer responses to its innovations, as well as statements regarding the company's outlook for the first quarter of 2025. 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 business are set forth in the risk factors section of AOI's reports 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 Susquehanna Annual Technology Conference virtually on Friday, February 28th. Management will host an investor session at OFC on Tuesday, April 1st in San Francisco. This discussion will be webcast live and a link to the webcast will be available on the investor relations section of the AOI website. We would also like to note that the date of AOI's first quarter 2025 earnings call is currently scheduled for May 8th, 2025. Now, I would like to turn the call over to Dr. Thompson Lin, AOI's founder, chairman, and CEO. Thompson?

speaker
Dr. Thompson Lin
Founder, Chairman and CEO, Applied Optoelectronics

Thank you, Lindsay, and thank you for joining our call today. During the first quarter, we delivered revenue of $100 million. which was in line with our guidance range of $94 million to $104 million. We recorded non-GAAP gross margin of 28.9%, which was in line with our guidance range of 27.5% to 29.5%. All non-GAAP loss per shares of $0.02 was in line with our guidance range of a loss of $0.04 to earnings of $0.04 per share. Total revenue for our data center products of $44.2 million was essentially spread year-over-year and was up 8% sequentially. Revenue for our 4NG products increased 40% year-over-year and 70% sequentially. The goal was primarily driven by increased adoption of 4NG products by our data center customers along with new customers that we began shipping to during the year. Total revenue in our CATV segment was $52.2 million, which increased more than four times year-over-year and more than doubled sequentially, largely driven by a shipment of our 1.8 gigahertz amplifiers for one of our major MSO customers. As we have discussed on our prior earning calls, our MSO customers are in the process of upgrading their outside plant networks so that they can support higher bandwidth in the return path direction and eventually enable DOSIS 4.0. We are pleased to announce that during the quarter, we will receive a substantial order for our quantum bandwidth networking products from our top North American cable operator. This order is for product that began shipping this month. With that, I will turn the call over to Stephan to review the details of our Q4 performance and our Q1, Stephan. Thank you, Thompson.

speaker
Dr. Stephan Murray
Chief Financial Officer & Chief Strategy Officer, Applied Optoelectronics

We're pleased to end the year on a high note, driven by strength in both our data center and CATV businesses, and with solid momentum heading into 2025. As Thompson mentioned, Our Q4 results were in line with our expectations. We delivered revenue of $100 million, which was in line with our guidance range of $94 million to $104 million. We recorded non-GAAP gross margin of 28.9%, which was in line with our guidance range of 27.5% to 29.5%. And lastly, our non-GAAP loss per share of 2 cents was within our guidance range of a loss of 4 cents to earnings of 4 cents per share. During the fourth quarter, we continued to execute on many of the initiatives that we laid out last year. In our data center business, on our last few calls, we discussed how we had begun to receive orders for 400G products from another large hyperscale customer. In line with our expectations, we continue to see increasing orders for 400G products, both from long-term hyperscale customers, as well as from this new hyperscaler that we've been talking about for the last several quarters. We continued to make good progress on our 800G products with customers beginning to give us clear demand forecasts, which indicate ramping demand beginning in the second half of 2025, in line with our expectations. In our CATV business, as Thompson mentioned, we received a substantial order for our quantum bandwidth networking products from a top North American cable operator. These products began to ship this month. and we expect additional orders throughout the year based on forecasts we have received from this customer. We are encouraged by the demand that we are seeing for our CATV products and are very excited to announce that our next-gen quantum bandwidth amplifiers have already begun to be deployed by a major North American MSO as part of its publicly announced network upgrade project. Lastly, during the quarter, we took steps to expand our production capabilities, We have been retrofitting our facility in Sugar Land, Texas, to accommodate new automated production equipment, which we expect to begin to receive next month. This equipment will be used for the production of both 400G and 800G transceiver products. We also signed an agreement to lease an additional building in Taiwan, which we are outfitting in order to increase production of our data center and CATV products there. Turning to our fourth quarter results. Our total revenue was $100 million, which was up 66% year-over-year and up 54% sequentially, and was in line with our guidance range of $94 million to $104 million. During the fourth quarter, 44% of revenue was from data center products, 52% was from CATV products, with the remaining 4% from FTTH, telecom, and other. In our data center business, Q4 revenue came in at $44.2 million, which was essentially flat year over year and increased 8% sequentially. The sequential increase was due to shipments to existing customers, along with the new hyperscale data center customer that we've talked about for the last several quarters. In the fourth quarter, 61% of data center revenue was from 100G products, 32% was from 200G and 400G transceiver products, and 8% was from 40G transceiver products. As our data center customers work on building out their next generation AI-focused data center architectures, we remain active in our 800G application efforts with several hyperscale customers. During the quarter, we received the first significant demand forecast from one of our hyperscale customers that bolsters our previously held expectation of a second half 2025 ramp in 800G sales. In our CATV business, with the explosive growth of data consumption and rising user expectations, we are already being recognized by cable operators as a preferred partner to ensure that these upgrades minimize cable subscribers' network interruptions and also optimize performance. As a result, CATV revenue in the fourth quarter was $52.2 million, which was up more than four times year over year and more than doubled sequentially. This significant increase is due to the ramp in orders for our 1.8 gigahertz amplifier products. We continue to believe our CATV revenue will ramp further in Q1 and will remain elevated throughout 2025. Now turning to our telecom segment. Revenue from our telecom products of $3.5 million was up 26% year over year and up 25% sequentially. Looking ahead, we continue to expect telecom sales to fluctuate from quarter to quarter. For the fourth quarter, our top 10 customers represented 97% of revenue, up from 95% in Q4 of last year. We had three greater than 10% customers, two in the data center market, which contributed 31% and 11% of total revenue, respectively, and one in the CATV market, which contributed 52% of total revenue. In Q4, we generated non-GAAP gross margin of 28.9%, which was within our guidance range of 27.5% to 29.5% and was up from 25% in Q3 of 2024 and down from 36.4% in Q4 of 2023. The sequential increase in our gross margin was driven primarily by our favorable product mix, including growth in our CATD revenue. Looking ahead, we continue to expect that our gross margins will improve as we see the impact of manufacturing efficiencies in our CATV production and improving product mix. We remain committed to our long-term goal of returning our non-GAAP gross margin to around 40% and continue to believe that this goal is achievable. Total non-GAAP operating expenses in the fourth quarter were $31.5 million, or 31.4% of revenue, which compared to $21.6 million or 35.7% of revenue in Q4 of the prior year, primarily due to increased R&D spending in 800G, 1.6 terabit, and quantum bandwidth products. Looking ahead, we expect non-GAAP operating expenses to increase slightly next quarter and range from $32 million to $33 million. In 2025, we anticipate modest additional increase, varying with quarter-by-quarter fluctuations, mainly in R&D expenditures. Non-GAAP operating loss in the fourth quarter was $2.5 million, compared to an operating income of $0.4 million in Q4 of the prior year. GAAP net loss for Q4 was $119.7 million, or a loss of $2.60 per basic share, compared with a GAAP net loss of $13.9 million, or a loss of 38 cents per basic share in Q4 of 2023. Our GAAP net loss in the fourth quarter of 2024 included a one-time charge of $112 million related to the exchange of our convertible notes in Q4. On a non-GAAP basis, net loss for Q4 was $1 million, or two cents per share, which compared to our guidance range of a loss of $1.9 million to income of $1.7 million, or loss per share in the range of four cents to earnings of four cents per basic share. This compares to a non-GAAP net income of $1.6 million or 4 cents per basic share in Q4 of the prior year. The basic shares outstanding used for computing the earnings per share in Q4 were 46.1 million. Turning now to the balance sheet. We ended the fourth quarter with $79.1 million in total cash, cash equivalents, short-term investments, and restricted cash. This compares with $41.4 million at the end of the third quarter of 2024. We ended the quarter with total debt excluding convertible debt of $46 million compared to $39.4 million at the end of last quarter. As of December 31, we had $88.1 million in inventory, which compared to $64.4 million at the end of Q3. The increase in inventory is primarily for raw materials purchased for customer orders. During the quarter, We raised $53.9 million net of costs and fees on our previously announced at-the-market program. We made a total of $25.7 million in capital investments in the fourth quarter, which was mainly used for manufacturing capacity expansion for our 400G and 800G transceiver products. This brings our total CapEx for the year to $48.8 million, which was up compared to 2023 of $12.6 million. reflecting higher capital needs as we expand production to accommodate increased demand. Going forward, we expect to make sizable CapEx investments over the next several quarters as we prepare for increased 400G, 800G, and 1.6 terabit data center product production in 2025. For the year, we expect between $120 million and $150 million in total CapEx. We expect to finance these investments through a combination of cash on hand, cash generated from operations, and some equity sales, including ongoing advanced discussions for possible strategic investments. This will mark the most significant capital expansion plan in our company's more than 27-year history. Included in this plan is adding significant production capacity in Texas, which we expect will make us one of the largest, if not the largest, domestic producer of data center transceivers for AI applications. We continue to believe that we are poised for a sustained period of growth in both our data center and CATV businesses, and that these capital commitments will be transformational to our company as we execute on these opportunities. Moving now to our Q1 outlook. We expect Q1 revenue to be between $94 million and $104 million, and non-GAAP gross margin to be in the range of 29% to 30.5%. Non-GAAP net income is expected to be in the range of a loss of $3.6 million to break even, and non-GAAP earnings per share between a loss of 7 cents per share and break even using a weighted average basic share count of approximately 49.6 million shares.

speaker
Call Moderator
Moderator

With that, I will turn it back over to the operator for the Q&A session. Operator?

speaker
Conference Operator
Call Operator

We will now begin the question and answer session. To ask a question, you may press star then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster. The first question comes from Tim Savigo with North Fund Capital Markets. Please go ahead.

speaker
Tim Savigo
North Fund Capital Markets

Hey, good afternoon and congrats on the ramp and cable in particular in the quarter. I wanted to ask about the capacity investments. I guess 135 or so million mid-range and pretty substantial in Q4 as well. I guess to what extent is that I imagine it's principally focused on data center, but maybe you could provide some color, data center versus cable, because it looks like you're going to continue to ramp there. And within data center, could you give us an estimate of the kind of capacity you're heading towards, whether that's revenue or incremental revenue capacity or unit volumes or however you'd like to discuss it? And as you close the year, what kind of annual revenue capacity are you targeting in the U.S.? ?

speaker
Call Moderator
Moderator

Okay, so there's a lot embedded in there.

speaker
Dr. Stephan Murray
Chief Financial Officer & Chief Strategy Officer, Applied Optoelectronics

As far as the application of the capital expenditures, it's going to be almost entirely for data center. There will be some spending on cable TV as well, but most of that ramp has already been accommodated in terms of production capacity. As far as what this would bring to us in terms of incremental capacity, You know, it's going to be designed for production of primarily 800 gig and 1.6 terabits. We're still working with our customers and other related parties to figure out exactly how much of that capacity is going to be built in the U.S. versus other locations. So I can't answer that question directly, but it's going to be substantially targeted at U.S. investment. And again, mostly for 800 gig and 1.6 terabits.

speaker
Dr. Thompson Lin
Founder, Chairman and CEO, Applied Optoelectronics

So let me give you the answer. The other is for the laser, the manufacturer in Houston. So we're getting to the 4-inch manufacturer for the EML and the high-power single-mode laser. For 800G 1.6T, I think our plan to have maybe more than 120,000 or even 140,000 per month of capacity by end of this year of early next year. There's a single more transceiver for data center.

speaker
Tim Savigo
North Fund Capital Markets

Okay, that's super helpful and kind of a good segue to the next question, which is, Stephan, you mentioned some demand forecasts coming in from hyperscale customers for 800 gig. I imagine that's related to your capacity planning, but any chance you can quantify that? that type of demand, or should we assume it's in line with the monthly production figures that Thompson just mentioned?

speaker
Dr. Stephan Murray
Chief Financial Officer & Chief Strategy Officer, Applied Optoelectronics

Yeah, it's in line with those production figures. I mean, obviously we're not planning on targeting our entire CapEx at one particular customer, so there's some aggregated demand across a number of different hyperscale customers, but certainly the aggregate demand is consistent with the numbers that Thompson mentioned.

speaker
Call Moderator
Moderator

Okay, I'll pass it on to me to come back later.

speaker
Conference Operator
Call Operator

Again, if you have a question, please press star, then 1. Our next question comes from Michael Genovese with Rosenblatt Securities. Please go ahead.

speaker
Michael Genovese
Rosenblatt Securities

Great. Thanks very much. I guess the first question on the quantum bandwidth to a North American cable order that you referenced in the quarter, just explain to us how is that similar or different from the – 1.8 gigahertz amplifiers that drove the sequential increase in the quarter. Is that a different product and a different customer, or is it related?

speaker
Dr. Stephan Murray
Chief Financial Officer & Chief Strategy Officer, Applied Optoelectronics

No, it's the same. Quantum bandwidth is a suite of products that includes amplifiers and other things. This was specifically for our 1.8 gigahertz quantum bandwidth amplifier products. So, yeah, it's the same product that we were talking about earlier.

speaker
Michael Genovese
Rosenblatt Securities

Okay. And then I guess just could you kind of give us any more color on, I mean, obviously the data center opportunity is a multi-year opportunity and we're, you know, identified some targets sort of for the second half of the year. But if we think about the quarter itself and the first quarter, you know, with three hyperscale customers that we sort of know about, just, you know, how are the quarter versus your expectations different? Are things going slower in the near term, or are they going according to your expectations? Just a little bit more color on data center would be helpful.

speaker
Dr. Stephan Murray
Chief Financial Officer & Chief Strategy Officer, Applied Optoelectronics

I think it's pretty much in line with our expectations. We've said pretty consistently for a while that 400 gig was going up, which it is. It's up almost 4x year over year. Meanwhile, 100 gig is gradually declining, which is what we've said for a while as well. And that 800 gig and 1.6 terabit will start ramping. I mean, 800 gig later this year, 1.6 terabits maybe later this year, more likely 2026. So all this is in line with what we've expected.

speaker
Michael Genovese
Rosenblatt Securities

And for your 400G result in the quarter, or what 400G could be in 1Q, is that gated by capacity? Or is capacity not an issue in 400G?

speaker
Call Moderator
Moderator

The capacity is sort of a moving target, right?

speaker
Dr. Stephan Murray
Chief Financial Officer & Chief Strategy Officer, Applied Optoelectronics

We're adding capacity as demand, you know, shows that to be prudent, right? In other words, we're not getting too far ahead on the capacity expansion plan. So, you know, there's a number of different products that go into the 400 gig mix. Some of those were at capacity. Others were a little below. But, you know, in general, we're trying to keep capacity in line with demand.

speaker
Michael Genovese
Rosenblatt Securities

Okay, just last quick one for me. The 120 to 150 million capex target in 2025. I actually suspected that maybe it could have even been higher than that. So I'm kind of wondering, is that like a number that would have to be repeated in the next year? Or, or does that get you multiple years of revenue growth?

speaker
Dr. Stephan Murray
Chief Financial Officer & Chief Strategy Officer, Applied Optoelectronics

So one would say 150? Let's put it this way. Our hope is that we're going to continue to make sizable capital investments because that means that our revenue in the future is expected to continue to ramp, which is what I think, based on what we're hearing from our data center customers, this is a multi-year upgrade cycle that they're going through with respect to their AI data centers. And to that extent, if we're participating in that, then our expectation is that we would continue to see increased demand you know, not just 2025 and we're done. So, you know, I can't give you any kind of guidance on what we're going to be in 2026 in terms of CapEx, but, you know, I think it would be a very good sign if we continue to invest, you know, substantial amounts.

speaker
Dr. Thompson Lin
Founder, Chairman and CEO, Applied Optoelectronics

Well, let me say that based on the information we have from four or five customers, I think by end of next year, The demand for the 800G 1.6T single mode transceiver could be more than $200,000 per month or even $250,000 per month. But I think we want it to be conservative because, you know, the demand changes from time to time. We will not invest until we got the commitment or maybe the sign contract with customers. But this year, I think we are very competent. the demand there, and that's why we need to speed up the investment, especially in Houston. I think really we need to make it to even Houston because I think that's required by the customers. All right?

speaker
Michael Genovese
Rosenblatt Securities

Thanks so much.

speaker
Conference Operator
Call Operator

The next question comes from Simon Leopold with Raymond James. Please go ahead.

speaker
Jeff Kochi (in for Simon Leopold)
Raymond James

Yes. Thanks. This is Jeff Kochi in for Simon. Um, so I just wanted to hit on 400 gig for a little bit. Maybe you could break out of the 14 million, like how much was, um, the Microsoft AOC agreement. And then, you know, thinking of just about how the, maybe the front end, um, in the 400 days, like demand there, how, how you expect that to trend, uh, into March and, and, um, I don't follow up.

speaker
Dr. Stephan Murray
Chief Financial Officer & Chief Strategy Officer, Applied Optoelectronics

Yeah, I can't really comment on customer-specific products and all that. That would be covered under NDA. But I can say that we've been pretty consistent that the Microsoft program would ramp later this year, and that's consistent with the forecast that we're continuing to see. But with respect to exactly how much we sold this quarter, we don't break that out. And I'm sorry, your second question was what?

speaker
Jeff Kochi (in for Simon Leopold)
Raymond James

Just, you know, the... I know that that was targeted more to the back end. I'm just thinking the 400 gig that's more front end related. Or is some of the 400 gig that you're getting into business, should we consider that back end? And how do you expect that dynamic to trend into March? Thank you.

speaker
Dr. Stephan Murray
Chief Financial Officer & Chief Strategy Officer, Applied Optoelectronics

Well, again, we don't give forward guidance by product line either, so I can't really comment on exactly what we're expecting.

speaker
Dr. Thompson Lin
Founder, Chairman and CEO, Applied Optoelectronics

No, let me say that. Okay. Right now, we can see very strong demand for 400G single-mode transceiver for maybe two kilometers or 10 kilometers. That's why we are adding another capacity too, not only 800G, but that's not the majority of this year. So basically, I would say within a few months, I would say, I don't know, June or July, I think the single mold capacity, we need to be maybe, I would say, minimum 50,000 to 70,000 per month. The multi-mold, I think we have to go up maybe 120,000 per month, maybe by similar times, all right? June, July, August, just based on the demand we see, all right? That's how far I can say. But we have many customers, okay? Maybe, I don't know, five or six. 7,000, all right, or in the U.S., 2,000, all right?

speaker
Jeff Kochi (in for Simon Leopold)
Raymond James

Anything else? Yeah, maybe just clarify, I'm sorry if I missed this, but like embedded within the guidance for March, where do you see, you know, like CAT TV versus data center sales? Data center should be up, I'm assuming, and maybe some moderation in CAT TV. Thank you.

speaker
Dr. Stephan Murray
Chief Financial Officer & Chief Strategy Officer, Applied Optoelectronics

Yeah, I mean, again, we don't really break it out by product line like that, but I think we've said pretty consistently that we're going to reach a kind of plateau in CATV revenue. I mean, I've been pretty consistent in past calls talking about how at some level our CATV revenue is limited by the rate at which our customers can deploy the product. This is not like data center where, A technician can just go into the data center and replace a bunch of product all at once. Each one of these amplifiers needs to have a crew, a bucket, trucks, and a lot of infrastructure is required to do that. So there's just a natural limit to how much of that can be installed in a given quarter. So we expect to see kind of a plateauing in the CATV business. And as Thompson mentioned, the data center business is where we expect to see most of the growth going forward.

speaker
Dr. Thompson Lin
Founder, Chairman and CEO, Applied Optoelectronics

And by the way, the Q1 guidance is not limited by demand. It's because of Chinese New Year, as you know. So there's two, three weeks or even one month including the manpower issues. So otherwise, I think the rate will be much, much higher. So in Q1, the rate is limited by our capacity, especially manpower, not the demand. So that's why we are working very hard to catch up the demand for the customer, especially in data center. 100G, 400G, then 800G, as in possible, we should start getting to volume manufacturer in Q2, for sure Q3.

speaker
Call Moderator
Moderator

Great, thanks.

speaker
Conference Operator
Call Operator

OK. The next question comes from Dave Kang with B. Reilly Securities. Please go ahead.

speaker
Dave Kang
B. Reilly Securities

Thank you. Good afternoon. First question is on cable TV, you got that 52% customer. Is that a DISC or can you talk more about that customer? Because it's not ATX, right?

speaker
Dr. Stephan Murray
Chief Financial Officer & Chief Strategy Officer, Applied Optoelectronics

No, it's the same big customer we've had for the last few quarters in cable. And it is a stocking distributor for cable TV products in the U.S., yeah.

speaker
Dave Kang
B. Reilly Securities

So how is that, you know, can you talk about the difference between, demand difference between your product versus, say, like a DAA, you know, from Harmonic and Vesina, where they're talking about, you know, slowing down, where you guys seem to be kind of immune from that?

speaker
Dr. Stephan Murray
Chief Financial Officer & Chief Strategy Officer, Applied Optoelectronics

Yeah, I mean, I think we've mentioned this on the last few calls, but I'll kind of reiterate that. So the DAA, the element that is significant principally causing the DAA deployments to slow down is a remote PHY module. It goes out in the node and it translates the digital input and output signals into analog signals that can be carried over the rest of the coax portion of the HSC network. That particular device has had some challenges. And so Our products are downstream of that device. Right now what we're selling are the amplifier products that go downstream of the node. So the upgrade of those amplifiers is independent of the DAA aspect of the network. And carriers can get benefits from deploying the amplifiers independent of whether or not the node has been upgraded. And so that's what they're doing. As they work their way through whatever the issues are with the remote PHY deployments, they're going full speed ahead on their amplifier upgrades so that when the remote PHY devices and the nodes are ready, then they'll be able to immediately or more quickly turn on DOCSIS 4.0 services.

speaker
Dave Kang
B. Reilly Securities

Got it. And then regarding your top customer, that DC customer, or cable TV customer, I mean, who are their major customers? I mean, do they sell to major MSOs like Charter and Comcast, or any more color on their customer base?

speaker
Call Moderator
Moderator

I mean, yes, they do sell to large MSOs, including the ones that you mentioned, and a variety of others.

speaker
Dr. Stephan Murray
Chief Financial Officer & Chief Strategy Officer, Applied Optoelectronics

Got it. As we mentioned, the units that we have been selling are... principally destined for large North American MSOs who are doing upgrade projects.

speaker
Dave Kang
B. Reilly Securities

Got it. And then I'm assuming when you talk about second half regarding 800 gig ramping in second half, I'm assuming third quarter, what's your lead time or expected lead times for 800 gig?

speaker
Call Moderator
Moderator

Is that like maybe 10 weeks or eight weeks? Something like that.

speaker
Dr. Stephan Murray
Chief Financial Officer & Chief Strategy Officer, Applied Optoelectronics

I mean, typically our lead time in the data center business has been somewhere around 8 to 10 weeks. I guess that would be what we would expect for the 800 gig as well. There's no principal reason why 800 gig would differ from that.

speaker
Dave Kang
B. Reilly Securities

Got it. Okay. Sounds good. Thank you.

speaker
Conference Operator
Call Operator

Yep. The next question is a follow-up from Tim Savigo with Northland Capital Markets. Please go ahead.

speaker
Tim Savigo
North Fund Capital Markets

Thanks. And this kind of follows on to Thompson's comments about mid-year capacity. And so it sounds like a lot of this is going to need to happen pretty quickly. I guess talking about the potential for a strategic investment, it seems like if that's going to happen, that would need to happen pretty soon to be part of the financing of the capacity. I just want to get any color on that on any expectations you might have?

speaker
Dr. Stephan Murray
Chief Financial Officer & Chief Strategy Officer, Applied Optoelectronics

Well, look, I mean, we've been adding, I mean, as you can see, our CapEx numbers are, you know, have ramped fairly dramatically over the last couple quarters already. So, you know, we're not holding back on investments that we need to make, you know, until we get a strategic investment. What I was trying to say in our prepared remarks was simply that, you know, those discussions are ongoing and that

speaker
Call Moderator
Moderator

You know, that could be a part of our financing plan. Okay, thanks very much.

speaker
Dr. Thompson Lin
Founder, Chairman and CEO, Applied Optoelectronics

And let me add something, too. For the full energy, the members are actually not the shortage. It's AOC. But the same capacity can be used for A energy, AOC, too. So if it comes to, then the capacity is 240,000 per month. of storage of 120,000 per month AOC by June or July, and for both 400G and 800G, and that's based on the demand from the customer. The other is most of this new production line will be almost fully automatic, not like 100G manufacturing line. It's totally different, so we can set minimum 80% to 90% main power. And that's why we are very confident we can make a choice in Q-CCIIT. All right.

speaker
Call Moderator
Moderator

Thank you. And the next question comes from Michael Genovese from Rosenblatt Securities as a follow-up. Please go ahead.

speaker
Conference Operator
Call Operator

Hello, Michael. You're on the podium again.

speaker
Michael Genovese
Rosenblatt Securities

Oh, sorry. I was on mute there. Thanks again. Just a last follow-up question for me. I just want to ask directly, have you guys qualified an 800G product with any customer yet, and have you shipped any 800G revenue in the fourth quarter?

speaker
Dr. Thompson Lin
Founder, Chairman and CEO, Applied Optoelectronics

We are almost there. We ship out a lot of the 800G. It's about a few hundred, a few thousand. That's called the final qualification, besides the lab, it's more like data center qualification, something like that.

speaker
Michael Genovese
Rosenblatt Securities

Okay, thanks again. To more than one customer, you said?

speaker
Call Moderator
Moderator

Three or four, four? Three or four, yes.

speaker
Michael Genovese
Rosenblatt Securities

Okay, that's all for me. Thanks again.

speaker
Call Moderator
Moderator

Yeah, single mode transceiver, not remote. Okay.

speaker
Conference Operator
Call Operator

At this time, we have no further questions, and I will turn the call back over to Dr. Thompson Lin for closing remarks.

speaker
Dr. Thompson Lin
Founder, Chairman and CEO, Applied Optoelectronics

Again, thank you for joining us today. As always, we want to extend a thank you to our investors, customers, and employees for your continued support. As we discussed today, we believe the long-term demand driver remains strong for both our data center and CATB business, and we believe we are well positioned to catalyze on this opportunity. We look forward to seeing many of you at RFC.

speaker
Call Moderator
Moderator

Thank you.

speaker
Conference Operator
Call Operator

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Disclaimer

This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.

-

-