Release Date: August 06, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Applied Optoelectronics Inc (AAOI, Financial) reported a 25% year-over-year increase in data center revenue, with a sequential growth of 19%.
- The company has begun receiving initial orders for 400G products from a large hyper-scale customer, expanding its reach to three out of the five largest hyper-scale data center customers in the US.
- Revenue for 100G products increased by 21% year-over-year, and revenue for 400G products more than doubled in the same period.
- The company anticipates significant improvement in its CATV business starting in Q3, with a ramp expected in Q4 and into 2025.
- Applied Optoelectronics Inc (AAOI) expects Q3 revenue to be between $60 million and $66 million, projecting over 45% sequential revenue growth.
Negative Points
- Non-GAAP gross margin for the second quarter was 22.5%, below the guidance range of 25.5% to 27.5%, primarily due to product mix.
- CATV segment revenue was down 38% year-over-year and 33% sequentially, driven by slow sales of DOCSIS 3.1 equipment.
- The company reported a non-GAAP operating loss of $16.2 million for the second quarter, compared to a loss of $8.7 million in the prior year.
- GAAP net loss for Q2 was $26.1 million, or a loss of $0.66 per basic share, compared to a loss of $16.9 million or $0.57 per share in Q2 of 2023.
- The gross margin in Q3 is expected to be lower than anticipated due to additional costs from the rapid ramp of 1.8 gigahertz CATV products.
Q & A Highlights
Q: Can you provide more details on the new hyperscale win? Is it similar to an AOC device?
A: For confidentiality reasons, I can't disclose too much, but it's a 400G product in line with our standard data center transceiver products. - Stefan Murry, CFO and Chief Strategy Officer
Q: What is the expected timeline for the CATV segment to reach a $25 million quarterly run rate?
A: We expect a substantial improvement in CATV revenue in Q3 and anticipate reaching around $25 million before the end of the year. The current challenge is the gross margin due to cost overruns as we ramp up production. - Stefan Murry, CFO and Chief Strategy Officer
Q: The share count is increasing in the Q3 guidance. Can you explain why?
A: The increase is due to a combination of stock grants already made and provisions for additional share issuance. - Stefan Murry, CFO and Chief Strategy Officer
Q: Regarding the Q3 revenue increase, is it more from the data center or cable segment?
A: In Q3, more additional revenue is coming from cable than data center. However, in Q4, we expect data center revenue to outgrow cable TV on a dollar basis. - Stefan Murry, CFO and Chief Strategy Officer
Q: Can you provide more color on the new 10% customer in the data center segment?
A: The customer has been with us for a while and is another hyperscale customer predominantly buying 400G products to build out their AI infrastructure. - Stefan Murry, CFO and Chief Strategy Officer
Q: Is the new 400G customer a net new customer or a returning one?
A: We classify a customer that hasn't done business with us in a while, like two years, as a new customer. - Stefan Murry, CFO and Chief Strategy Officer
Q: Will the gross margin issues in the cable segment be resolved by Q4?
A: We expect most of the extra costs incurred in production to be resolved by Q4, with a potential full recovery by the following quarter, aiming for a gross margin around 40%. - Stefan Murry, CFO and Chief Strategy Officer
Q: What is driving the expected strong growth in the data center segment in Q4?
A: The growth is expected to be driven mostly by 400G products, with some contribution from 800G products. - Stefan Murry, CFO and Chief Strategy Officer
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
