Good afternoon. I will be your conference operator. At this time, I would like to welcome everyone to Applied Optoelectronics Third Quarter 2021 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions] Please note, this call is being recorded. And now I would like to 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, and I'm pleased to welcome you to AOI's third quarter 2021 financial results conference call. After the market closed today, AOI issued a press release announcing its third quarter 2021 financial results and provided its outlook for the fourth quarter of 2021. 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. Stefan Murry, AOI's Chief Financial Officer and Chief Strategy Officer. Thompson will give an overview of AOI's Q3 results and Stefan will provide financial details and the outlook for the fourth quarter of 2021. 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 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 to differ materially from those anticipated in such forward-looking statements. In some cases, you can identify forward-looking statements by terminology, such as believes, anticipates, estimates, intends, predicts, expects, plans, may, should, could, would, will or thinks and by other similar expressions that convey uncertainty of future events or outcomes. 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 2021. Except as required by law, we assume no obligation to update…

Thank you, Lindsay. Thank you for joining our call today. The third quarter [indiscernible] largely as we [indiscernible]. We delivered inline revenue and gross margin in the [indiscernible] to our expectations. During the quarter, we continue to see strong demand in the CATV market and improving conditions in the data center and telecom markets. However, as we anticipated, our revenue in the third quarter was diversity impacted by approximately $3 million as a result of a well-known global component shortage. And our Q3 gross margin came in at a low end of our expectations. Mostly due to unfavorable product mix in our CATV segment and increased costs from component shortage. We achieved total revenue for the third quarter of $53.3 million, decreased 30.5% compared to the quarter of 2020 and was down 1.7%, sequentially. Total revenue in our CATV segment of $23.1 million was up 98.4% year-over-year, that was down from a record $27.6 million in the second quarter of 2021. The overall CATV demand environment remains strong, and we continue to see towards new customer traction with a number of offers. Total revenue for our data centers were down of $23.9 million, decreased 56.8% year-over-year, an increase 6.9%, sequentially. During the third quarter, [indiscernible] among customers. One of design wins in the quarter was a new design win [indiscernible] with an existing customer. There is a network equipment manufacturer supplying enterprise and hyperscale data and the customers. In addition, total design wins are related to 25 [indiscernible] with a large multinational naval equipment manufacturer focus on a telecom market. Now turning to our telecom segment, [indiscernible] at $5.1 million down 42% year-over-year and up 54.5% sequentially. Prior year three to deliver sequential growth in this segment during the third quarter, we see continued volatility in the market condition in the China telecom market as a timing and cadence of the 5G rollout, there remains somewhat opaque. Looking ahead, we do expect quarter-to-quarter variability and [indiscernible] 5G rollout in China becomes more predictable. With that, I'll turn the call over to Stefan to review the details of our Q3 performance and outlook for Q4. Stefan?

Thank you, Thompson. As Thompson mentioned, the third quarter played out largely as we expected, and we delivered revenue and gross margin in line with our expectations and a narrower non-GAAP net loss relative to our expectations due to slightly lower than expected operating expenses. During the quarter, we continue to see strong demand in the CATV market and improving conditions in the data center and telecom markets. However, as we anticipated, our results were adversely impacted by approximately $3 million due to the well-known component shortages and supply chain disruptions. And our Q3 gross margin came in at the low end of our expectations, mostly due to unfavorable product mix in our CATV segment and increased costs from component shortages. While we were able to mitigate some of these anticipated impacts, we saw additional component shortages later in the quarter due to the shutdown in Vietnam. As we work to improve our supply chain, we may continue to have longer than usual backlog for several quarters. Looking ahead, we expect that the component shortages could adversely affect our fourth quarter by approximately $2 million to $3 million. We also expect increased costs associated with the shortages to persist through Q4. Turning to our quarterly performance. We secured nine new design wins amongst seven customers. Of the nine design wins four were with data center customers, two were with telecom customers, two were with FTTH customers and one was with a CATV customer. As Thompson mentioned, one of these design wins was a new 400G transceiver design win with a network equipment manufacturer supplying enterprise and hyperscale data center customers. In addition, two of the design wins are related to 25G PON and are with a large multinational network equipment manufacturer focus on the telecom market. All of the design…

[Operator Instructions] And the first question comes from Simon Leopold with Raymond James.

Thank you for taking my question. This is Mauricio for Simon today. Stefan, can you give us an update on your traction with your 400-gig opportunity? I think you previously disclosed expectation for 400-gig to ramp on the third quarter and become more meaningful in the fourth quarter? Maybe you can elaborate on the 400-gig inflation this quarter and how should we think about the opportunity going forward?

Yes, so as we noted in our prepared remarks, what we've seen is that there is at least one of our customers, one of the early customers that qualified our 400G products has seems to be seeing some component shortages in other parts of the 400G network that is -- it's not optical product, is not AOI inability to supply those parts, but they're seeing shortages of some other component that's making it difficult for them to ramp their 400G efforts as quickly as they would like. So, as we noted in our prepared remarks, we continue to expect to see growth overall in the data center market but the 400G rollout maybe a little bit later pending how long this supply disruption that they're seeing less.

[Operator Instructions] All right. [indiscernible] I would like to hand the floor to Dr. Thompson Lin for any closing comments.

Okay. Thank you for joining us today. We want to thanks to our investors, customers and employees for your continued support and we look forward to see many of you virtually in all upcoming investment conference.

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