Applied Optoelectronics, Inc.

Good afternoon. I will be your conference operator. At this time, I would like to welcome everyone to Applied Optoelectronics Second Quarter 2025 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 1 on your telephone keypad. To withdraw your question, please press star, then 2. To request operator assistance during the call, please press star then zero. Please note that today's event is being recorded. I will now turn the call over to Lindsay Savarese, Investor Relations for Applied Optoelectronics. Ms. Savarese, you may begin.

Thank you. I'm Lindsay Savarese, Investor Relations for Applied Optoelectronics. I'm pleased to welcome you to AOI's second quarter 2025 financial results conference call. After the market closed today, AOI issued a press release announcing its second quarter 2025 financial results and provided its outlook for the third 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 Q2 results, and Stephan will provide financial details and the outlook for the third quarter of 2025. A 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, that 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 think, 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 third 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 Reports on File with 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 the date of AOI's third quarter 2025 earnings call is currently scheduled for November 6th, 2025. Now, I would like to turn the call over to Dr. Thompson Lin, AOI founder, chairman, and CEO. Thompson?

Thank you, Lindsay, and thank you for joining our call today. While EPS came in below our expectations, primarily due to elevated operating expense, The inherent strength of our business fundamentals was apparent with strong year-over-year timeline growth and cost margin expansion. The rise in our operating expense is a direct result of strategy investment in R&D and SG&A expense, driven by increased business activity, including new customer qualification efforts for 800G and 1.6T As you can see from our results as well as some of our recent announcements, these expenditures are already translating into higher level of customer engagement, certifications, and ultimately revenue opportunities. During the quarter, we saw steady growth in our data center business. we complete our fourth volume shipment of high-speed single-mode 400G data center transceiver to recently engage major hyperscale customers. And we are seeing increased sequential demands for other hyperscalers for this product as well. We continue to make progress on customer qualification on our 800G product, and we continue to have confidence in the second half range in 800G sales. In our CATV business, we continue to see strong demand in this market, and we announced that we completed testing and certification with charters for plans to deploy our 1.8 GHz amplifiers and quantum NIMH remote management software. During the second quarter, we delivered revenue of $103 million which was in line with our guidance range of $100 million to $110 million. We recorded non-GAAP gross margin of 30.4%, which was in line with our guidance range of 29.5% to 31%. Our non-GAAP loss per share of 16 cents was below our guidance range of a loss of 9 cents to a loss of 3 cents. due to larger than anticipated operating expense, as I mentioned earlier. Total revenue for our data center product of $44.8 million increased 30% year-over-year and 40% sequentially, largely due to increased demand for our 100G and 400G products. Revenue for our 100G product increased 25% year-over-year while revenue for our 400G product increased 43% year-over-year. Total revenue in our CATV segment of $56 million increased more than 8 times year-over-year. In line with our expectations, our CATV revenue decreased 13% sequentially of a seasonally strong Q1. and as we do two-world production to our Motorola-style amplifier products. With that, I will turn it over to Stephen to review the details of our Q2 performance and our Q3 study.