Good afternoon. I will be your conference operator. At this time, I would like to welcome everyone to Applied Optoelectronics Third Quarter 2022 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]. I will now 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 2022 financial results conference call. After the market closed today, AOI issued a press release announcing its third quarter 2022 financial results and provided its outlook for the fourth quarter of 2022. The release is also available on the company's Web site 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 Web site 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 2022. 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, levels of activity, performance or achievements of the company or its industries, 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, intend, predict, expects, plan, may, should, could, would, will, potential or things, or by the negative of those trends or other similar expressions that convey uncertainty of future events or outcomes. The company updates these forward-looking statements on it's current expectations, assumptions, estimate and projections. While the company believes these expectations, assumptions, estimates and projections are reasonable, such forward looking statements…

Thank you, Lindsay, and thank you for joining our call today. For the third quarter, total revenue came in below our expectations. We delivered gross margin in line and a narrow non-GAAP loss per share within our expectations. As you may have seen on September 15th, we announced that we have entered into an agreement with Yuhan Optoelectronic Technology for sale of our manufacturing facilities located in the People's Republic of China and certain assets related to AOI transceiver business and multiple channel optical subassembly products. For the Internet, datacenter, telecom and FTD edge markets for purchase price of $150 million, less a holdback amount. We continue to anticipate that the transaction will be completed in 2023, and is subject to customary closing conditions and regulatory approvals. Early feedback from our customers has been positive. We believe that our capability in chip fabrication and the continuity of [Indiscernible] supply chain is of utmost importance to our parents and our customers, and we believe most of them understand and appreciate the rationale behind the proposed [divestiture] of our transceiver manufacturing operation in the [import]. We believe this transition will generate significant proceeds, which will enable us to make serious investments in higher margin and higher growth opportunities. Following the transaction, AOI will have a focused portfolio composed of lasers with manufacturing facility in Taiwan and Sugar Land, Texas. We were able to have maintained our CATV product portfolio, utilizing our current [Taiwan] facilities for production, as well as our current Ningbo facility on a contract basis. Luckily, we believe that the transaction will open up big opportunity for customer expansion with our existing datacenter laser business. Turning to our third quarter results. We delivered revenue of $56.7 million, slightly below our guidance range of $57 million to $60 million due mainly to a faster than anticipated decline in 40G sales. We delivered non-GAAP gross margin of 18% at the high end of our guidance range of 16.5% to 18.5%, and a smaller non-GAAP loss per share of $0.26. Relative to our current range of a loss of $0.27 to $0.32 due to better than expected operating expenses. Total revenue in our CATV segment was a company record of $31.3 million, up 35% year-over-year and 32% sequentially, as we continue to see robust demand in the CATV markets. Total revenue for our datacenter products of $17.7 million decreased 26% year-over-year and 80% sequentially, largely due to a decline in 40G, which is nearing the end of its lifecycle, and 100G push is beginning to slowly decline as customers move to 400G. This was partially offset by an increase in 400G, which more than tripled sequentially from Q2. As anticipated, we believe that this increase in 400G is the beginning of a sustained trend of increase in revenue from this newer product line. 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, while our revenue came in below our expectations, we delivered gross margin in line with our expectations and a smaller non-GAAP loss per share relative to our expectations. We’re encouraged by the robust demand in the CATV environment, the strength we are seeing in the telecom market and the early shipments of our 400G products. Our total revenue for the third quarter increased 6% year-over-year to $56.7 million, which was slightly below our guidance range of $57 million to $60 million, primarily due to a faster than anticipated decline in 40G sales. As Thompson mentioned and as you may have seen, on September 15th, we announced that we have entered into an agreement with Yuhan Optoelectronic Technology for the sale of our manufacturing facilities located in the People's Republic of China, and certain assets related to our transceiver business and multichannel optical subassembly products for the datacenter telecom and FTTH markets for a purchase price of $150 million, less a holdback amount that is variable depending on working capital and other conditions at the time of closing. Currently, it would be approximately $7 million, making the total cash consideration for the divestiture approximately $143 million. I will spend a few moments on today's call to provide more detail on the strategic rationale as well as to discuss what AOI looks like as a company post the close of the transaction. As a reminder, we continue to anticipate that the transaction will be completed in 2023, and is subject to customary closing conditions and regulatory approvals, including CFIUS and ODI. We believe that the transaction would have a number of benefits for AOI. First, it would allow us to concentrate our efforts on growing our higher margin optical component chip business. Currently, the vast majority…

[Operator Instructions] We have a question from Ethan Widell of B. Riley.

This is Ethan calling in for Dave Kang. I just have one on my end. So we've seen some hyper scalars announcing pretty robust CapEx plans surrounding their data infrastructure buildout. So I was hoping you could provide a little additional color regarding overall optical demand, especially as it pertains to hyper scalars?

Well, as we noted, I think what we're seeing in the market right now, particularly with the hyper scalers is that our 400G business is beginning to ramp, as we noted, in our prepared remarks earlier. I mean, it was up more than 3 times sequentially. We have a pretty strong order backlog for those products, which we've anticipated and I think we've communicated that the last couple of quarters that we expected to see 400 gig ramping in the second half of the year. So it's good that we're actually experiencing what we projected to see earlier in the year. So I think the spending environment for the hyper scalers generally is, as you noted, fairly robust in terms of optical components spent. We're monitoring that based on our viewpoint moving forward on sort of macro conditions and how that's going to affect things. But right now where we stand, it looks like the spending plans for next year are starting to crystallize a little bit on the part of our customers. And again, we think the 400 gig ramp is good evidence that that's going to be a positive for us moving forward.

[Operator Instructions] This concludes our question-and-answer session. I would like to turn the conference back over to Dr. Thompson Lin for closing remarks.

Okay. 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. We look forward to updating you on our progress next quarter.

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