Good afternoon. I will be your conference operator. And at this time, I would like to welcome everyone to the Applied Optoelectronics Fourth Quarter and Full Year 2021 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. [Operator Instructions] Please note that this call is being recorded. I would now like to turn the conference over to Cassidy Fuller, Investor Relations for AOI. Ms. Fuller, you may begin.

Thank you. I'm Cathy Fuller, Investor Relations for Applied Optoelectronics. I'm pleased to welcome you to AOI's fourth quarter and full year 2021 financial results conference call. After the market closed today, AOI issued a press release announcing its fourth quarter and full year 2021 financial results and provided its outlook for the first quarter of 2020. 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. It will be archived for one year. Joining us on today's call are 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 Q4 results, and Stefan will provide financial details and the outlook for the first quarter of 2022. 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 can 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, intend, predict, expect, plan, may, should, could, would, will or things and by other similar expressions that may 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 innovation as well as statements regarding the company's outlook for the first quarter of 2022. Except as required by law, we assume no obligation to update forward-looking statements for any reason after 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 the company's reports and filed with the SEC, including the company's annual report on Form 10-K for the year ended December 31, 2020. Also, all financials 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 our earnings press release that is available on our website. I'd like you to know that date of our first quarter 2022 earnings call is currently scheduled for May 5, 2022. Now I'd like to turn the call over to Dr. Thompson Lin, Applied Optoelectronics' Founder, Chairman and CEO. Thompson?

Thank you, Cassidy. And thank you for joining our call today. Turning to the fourth quarter, we delivered revenue and non-GAAP EPS in line with our expectations and gross margin below our expectations, mostly due to unfavorable product mix and increased costs from unanticipated supply chain and logistic expenses. During the quarter, we continued to see strong demand in the CATV market and improving conditions in the data center market. We achieved total revenue for fourth quarter of $54.4 million, which increased 3.1% compared to the fourth quarter of 2020 and increased 2.1% sequentially. Total revenue in our CATV segment of $24.9 million was up 56.4% year-over-year and up [ph] 7.9%, sequentially. The overall CATV demand environment remains strong, and we currently have an unprecedented order backlog extended into Q4 of this year. We believe the condition in our CATV market are likely to remain highly unfavorable into 2023 because our products are currently being used in network upgrade project by the three largest CATV MSO in the US, along with other smaller operators. For the revenue for our data center product of $25.2 million decreased 23.1% year-over-year and increased 5.3% sequentially. The sequential growth is encouraged as inventory level with our largest data center customer appear to have returned to normal level and delivery against new demand from this customer has resumed. In addition to our largest data center customer, we saw a significant order increase from several of our new data center customers. Some of these increases were offset and anticipated decline in 40G revenue indicating that the mix continue to shift to 100G. In addition, I'm very pleased to report that during the quarter, we received our first volume orders for 400G products from two different data center customers. This represents the accumulation of a multi-year qualification effort with these customers, and we believe this initial order will lead to further significant order in the future as 400G gradually surpasses 100G as a dominant data rate within large data centers. During the fourth quarter, we secured four design wins among four customers. Two of these design wins were with data center customers and two were with telecom customers. One of the data center wins was with an existing data center customer for our 400G products. This customer is currently purchasing 100G product from AOI and expressed an initial volume order for its early 400G deployments. With that, I will turn the call over to Stefan to review the details of our Q4 performance and outlook for Q1. Stefan?

Thank you, Thompson. As Thompson mentioned, we delivered revenue and non-GAAP EPS in line with our expectations and gross margin below our expectations, mostly due to unfavorable product mix and unanticipated supply chain and logistics costs. During the quarter, we continued to see strong demand in the CATV market and improving conditions in the data center market. As we anticipated, our results were adversely impacted by approximately $3 million due to the well known component shortages and supply chain disruptions. Currently, we believe that supply constraints are easing and do not anticipate revenue shortfall in the first quarter due to an inability to source necessary raw materials. We do believe, however, that pricing and shipping costs on many of these components will remain elevated for some time, and this will negatively impact margins in the quarter. Turning to our quarterly performance. We secured four new design wins among four customers. Of the four design wins, two were with data center customers and two were with telecom customers. One of the data center design wins was our first for 400G products and was with an existing data center customer. This customer is currently purchasing 100G products from AOI and has placed an initial volume order for its earliest 400G deployments. We are pleased to report that this customer has chosen AOI as the primary supplier for its 400G data center transceiver needs. Total fourth quarter revenue of $54.4 million, increased 3.1% compared to the fourth quarter of 2020 and increased 2.1% sequentially. Our Q4 revenue was at the upper end of our guidance range of $51 million to $55 million. In the fourth quarter, 46% of our revenue was from our data center products, 46% from CATV products, with the remaining 8% from FTTH, telecom and other. In our CATV products…

Thank you. [Operator Instructions] And our first question today will come from Sam Peterman with Craig-Hallum Capital Group.

Hi, guys. Thanks for taking my question. I wanted to ask on gross margins. Obviously, it seems like some of the mix issues and cable resolving by the middle of the year that the margin outlook for the back half would be better. Do you guys think you can get into kind of the mid-20s there or what kind of as the cable issue resolves in data center, you start to ramp 400-gig, is mid-20s kind of reasonable for where you guys think you can go or how do you think about margins in the second half?

Yeah. I think mid-20s is an achievable number for us. It's difficult to put a precise time line on that. I mean there's a lot of moving parts as we mentioned, some of the component shortages and other things that have been affecting us. It's a little bit difficult to provide an exact time frame for that, but it's certainly a number that we think is achievable.

Okay. Fair enough. On data center, it sounds like that these two customers in 400 gig ramping in the second half that will provide an uplift from where you are today. Should you - how should we think about data center revenues in the first half? And then how should we think about what 400-gig can add? Is that in the low millions or even potentially more than that in the second half?

Well, I think data center revenues probably will be reasonably consistent throughout the first half of the year with where they were in the last quarter. And then as you mentioned, we'll start to see around. Now some of that - there will be a little bit of a shift there, as we mentioned, in our prepared remarks from sort of the 100G to starting to see a little bit more of an increase in the 400G revenue. It's probably not going to be hugely meaningful certainly in the first half until we start to see a ramp later on in the year, hopefully. But within that as that mix is shifting, we don't think the overall number is going to change that much in the first quarter or two or a year.

Okay. And then on the 400-gig customers, you kind of described one of them. Is there any way you could characterize the other one? And then is there any way - are you - on the second point of your customer, are you also the primary or lead supplier there? And how would you size that one of that opportunity relative to that first 400-gig win?

I would say that the size of both the customers is probably, I mean, roughly similar, I don't have the total purchasing trend for each of them. I don't have a number on the customer that we didn't talk about as much. I don't have information from them about whether we're the primary or secondary source on that. Some customers will tell you that information directly, others will not. So from that perspective, I can't give you that information. But certainly, we believe that all of the customers will have multiple sources and which are in the top one or two, you're probably going to get a pretty reasonable market share, and that's what we would expect with both of these customers.

Okay, fair enough. That's it from me. Thanks, guys.

Okay.

[Operator Instructions] And our next question will come from Robert Mandrov with Cowen. Please go ahead.

This is Bob Mander [ph] for Paul Silverstein. Guys, at one time, you were thinking that 400G could be 10% of revenue this year. Is that still in the work, still what you would see?

I wouldn't say - I don't think not. We haven't changed our outlook much on the 400G. I think it's really positive that we're starting to see actual orders or volume orders flowing from a couple of customers now. We still have a number of qualification efforts that are underway, but we're optimistic we'll culminate here in the next few months. And that - all of those opportunities together should drive revenue, whether that will be 10% by the end of the year or not, it's difficult to say, but I think it's possible.

Okay. In the past, I guess, last quarter, one of your principal customers for 400G was seeing their own supply chain constraints, which was limiting their ability to place orders. Did I hear correctly that, that's been resolved?

That was more related to just the overall inventory situation. As you recall, if you go back a few quarters, we had - that particular customer had been hit with supply chain issues that affected their overall deployment of not only 400G but also 100G technology at the time. So it wasn't a statement specifically at 400G, it was just their overall demand to be coming back.

Okay. But that's been - is that still an issue with them, or has that been addressed?

I think it's largely been addressed at this point.

Okay, okay. And at the moment, your data center and CATV is pretty evenly split. And it sounds like you're pretty optimistic about going forward to CATV. Do you still see an even split? Or are you going to expect to see CATV be a larger, a greater percentage than data center going forward for the year?

I think they will be fairly comparable for the year. As you recall from past experience, our first quarter in cable TV can be a little bit challenging for us just because we have the Lunar New Year shutdown, which affects most of our cable TV products are made in Asia. So by virtue of the fact that there's just less time in Q1 due to the Lunar New Year that oftentimes puts a damper on our ability to expand cable TV. So we may see cable TV not grow as much early in the year as it will in the back half of the year. And so from quarter-to-quarter, you might see some variability. But if you look at the year as a whole, I think the two will probably be fairly comfortable.

Okay. All right. Well, thank you for taking my questions.

My pleasure.

[Operator Instructions] And this will conclude the question-and-answer session. I'd like to turn the conference back over to Thompson Lin for any closing remarks.

Okay. Thank you for joining our call today. We want to extend a thanks to you, to our investors, customers and employees for your continued support. We look forward to updating you on our next earnings call.

And the conference is now concluded. Thank you for attending today's presentation. You may now disconnect your lines at this time.