Q1 2024 Applied Optoelectronics Inc Earnings Call

Participants

Lindsay Savarese; Investor Relations; Applied Optoelectronics Inc

Thompson Lin; Founder, Chairman, President & Chief Executive Officer; Applied Optoelectronics Inc

Stefan Murry; Chief Financial Officer,Chief Strategy Officer; Applied Optoelectronics Inc

Simon Leopold; Analyst; Raymond James

Michael Genovese; Analyst; Rosenblatt Securities

Tim Savageaux; Analyst; Northland Securities

Dave Kang; Analyst; B. Riley Securities

Presentation

Operator

Good day, and welcome to the Applied Optoelectronics first-quarter 2024 financial results conference call. (Operator Instructions)
Please note this event is being recorded.
I would now like to turn the conference over to Ms. Lindsay Savarese, Investor Relations for AIO. Please go ahead.

Lindsay Savarese

Thank you. I'm Lindsay Savarese, Investor Relations for Applied Optoelectronics. I am pleased to welcome you to AOI's first-quarter 2024 financial results conference call. After the market closed today, AOI issued a press release announcing its first-quarter 2024 financial results and provided its outlook for the second quarter of 2024.
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 Q1 results, and Stefan will provide financial details and the outlook for the second quarter of 2024. 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 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, forecast, anticipates, estimates, suggest, intends, predicts, expects, plans, may, should, could, would, will, potential, or thinks, 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 our products into new markets and customers sponsors to our innovation as well as statements regarding the company's outlook for the second quarter of 2024.
Except as required by law, we assume no obligation to update forward-looking statements for any reason after the date of this earnings call to conform these statements to actual results or 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 on file with the SEC, including the company's annual report on Form 10-K and the Company's 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 our earnings press release that is available on our website.
Before moving to the financial results, I'd like to announce that AOI management will virtually participate at the Needham Technology Media and Consumer Conference on May 16. And I'd like to note that the date of our second-quarter 2024 earnings call is currently scheduled for August 8, 2024.
Now, I would like to turn the call over to Dr. Thompson Lin, Applied Optoelectronics, Founder, Chairman and CEO. Thompson?

Thompson Lin

Thank you, Lindsay, and thank you for joining our call today. Our revenue and gross margins for the fourth quarter came in below our expectations, and our non-GAAP EPS was in line with our expectations despite the slow start to the year.
Based on our current forecast and very constructive customer interactions, we remain very positive on the improvement in the second half of the year. During the fourth quarter, we delivered revenue of $40.7 million, which was just below our guidance range of $41 million to $46 million. We delivered non-GAAP gross margin of 18.9%, which was below our guidance range of 21% to 23%, mainly driven by difference in product mix.
Our non-GAAP loss per share was $0.31 per share, which was within our guidance range of a loss of $0.28 to a loss of $0.33 per share. Total revenue for our data center products of $29 million was up 42% year over year and was down 35% sequentially. (inaudible) for our new product increased 33% year over year and (inaudible) for all four new products more than doubled in the same period.
Total revenue in our CATV segment was $8.7 million, which was down 69% year over year and down 30% sequentially, largely driven by continued January slow sales of DOCSIS 3.1 equipment as the industry prepares to transition to DOCSIS 4.0.
With that, I will turn the call over to Stefan to review the details of our Q1 performance and outlook for Q2. Stefan?

Stefan Murry

Thank you, Thompson. As Thompson mentioned, our first-quarter revenue and non-GAAP gross margin came in below our expectations, while our non-GAAP EPS was in line with our expectations. Based on our current forecast and very constructive customer interactions, we remain very positive on improvements in the second half of the year. We believe that the long-term demand drivers remain strong for both our data center and CATV businesses, and we believe we are well positioned to capitalize on these opportunities.
Looking to the back half of the year, there are a few key items to note that give us a basis for our optimistic outlook despite the slow start to the year. The first is that we have begun to receive forecasted orders for the VCSEL-based 400G active optical cables for which Microsoft provided development funding last year. While the pace of product adoption has been somewhat slower than we anticipated, we believe that the fact that we are now receiving forecast for these products for delivery in Q3 is a significant step in seeing meaningful business improvement.
The second is that follow-on projects to our 400 AOC program, specifically for our 800G and 1.6 terabit products have been fast tracked with our customers as they address an acceleration in demand for infrastructure around AI. We are being asked to compress the time from development to scale production as much as possible in order to meet this accelerated demand.
The third is that we have continued to experience significant traction and continue to have meaningful discussions with multiple large data center customers, some of which are new customers to AOI or customers that we have not worked with in many years. Specifically for our 400G, 800G, and 1.6 terabit products. We expect one or more of these customers will begin to contribute meaningfully to revenue starting in Q3.
And lastly, we believe that the transition to DOCSIS 4.0 will begin to take place in Q3 and that our products are aptly designed for the deployment of amplifiers and other network elements required for DOCSIS 4.0. We shipped our first fully production-ready DOCSIS 4.0 amplifier samples to a major customer last week and the feedback, while early, has been exceedingly positive. With the improvement we expect in the second half, we continue to believe that 2024 can be our first full year of non-GAAP profitability since 2018.
Turning to the quarter, our total revenue for the first quarter was $40.7 million, which was down 23% year over year and 33% sequentially, and which was just below our guidance range of $41 million to $46 million.
As we had discussed on our prior earnings call, the softness in Q1 was largely due to the combined effects of the Lunar New Year holiday in our Asian factories, along with some price reductions, which took effect in the quarter. During the first quarter of 71% of our revenue was from our data center products. 22% was from our CATV products with the remaining 7% from FTTH telecom and other.
Turning to our data center business, our Q1 data center revenue came in at $29 million, which increased 42% year over year and was down 35% sequentially. In the first quarter, 73% of our data center revenue was from our 100G products, 17% was from our 200G, and 400G transceiver products, and 3% was from our 40G transceiver products.
As we have discussed on several prior earnings calls, we signed two agreements with Microsoft in 2023 for the development of 400G products and beyond. This included a development program to make next-generation lasers for its data center and for the development of its 400G and next-generation active optical cables.
While not guaranteed, we continue to believe that the revenue opportunity for our 400G and 800G products could be greater at a longer duration than the revenue contribution we saw from this customer during the peak of the 40G products site, which suggests that revenue from these products may exceed $300 million over the several years of these build-outs. We began shipments late last year and have begun to receive new forecasted orders, which we expect to contribute to revenue later in Q2, and we believe will continue to ramp strongly in Q3 and Q4.
Also as a reminder, in 2023, we shipped samples of our 800G products to three different data center customers and had received initial positive feedback. As we discussed above, we are in detailed discussions with several hyperscale data center operators about ramping production for our 800G and 1.6 terabit products, starting in Q3 for 800G and early Q1 of 2025 for the 1.6 terabit products. These dates are several months earlier than we had previously been requested to deliver, and we believe the acceleration in the schedule is being driven by faster deployment of technologies needed by AI workflows.
Turning to our CATV business, CATV revenue in the first quarter was $8.7 million, which was down 69% year over year and down 30% sequentially, largely driven by generally slow sales of DOCSIS 3.1 equipment as the industry prepares to transition to DOCSIS 4.0. Looking forward, we continue to expect that our near-term CATV business will be down compared to the historic highs we saw in 2021 and 2022 as the MSOs transition to next-generation architecture. We anticipate this transition to DOCSIS 4.0 will begin to take place in Q3, and we are optimistic about the second half of the year and 2025.
As a reminder, we shipped initial test samples of our 1.8 gigahertz amplifier products to two major MSOs in Q4 of last year. And we received encouraging feedback on their performance and pricing. We are pleased to report that we shipped final qualification units of various amplifiers last week, and we would expect revenue to begin as early as the end of Q2 with significant ramp in the second half as we increase manufacturing capacity for these new products.
As Thompson mentioned, we will continue to carefully monitor MSL plans to upgrade to DOCSIS 4.0 networks. And we continue to believe AOI is a leader in technologies that will enable DOCSIS 4.0 and that we have the right portfolio in place to address our customers' needs.
Now turning to our telecom segment, revenue from our telecom products of $2.3 million was down 39% year over year and down 19% sequentially, largely driven by ongoing softness in 5G demand, particularly in China.
Looking ahead, we continue to expect telecom sales to fluctuate from quarter to quarter. For the first quarter, our top 10 customers represented 92% of revenue, down from 93% in Q1 of last year. We had two greater than 10% customers, one in the data center market and one in the CATV market, which contributed 62% and 21% of our total revenue, respectively.
In Q1, we generated non-GAAP gross margin of 18.9%, which was below our guidance range of 21% to 23% and was down from 36.4% in Q4 of 2023 and down from 23.2% in Q1 of 2023. The decrease in gross margin was driven mainly by product mix and some price reductions which took effect during the quarter. Looking ahead, we expect improving gross margins throughout the year as product mix improves in our data center business and CATV revenue begins to ramp. We remain committed to the long-term goal of returning gross margin to around 40% and believe that this goal is achievable.
Total non-GAAP operating expenses in the first quarter were $24.8 million or 61% of revenue, which compared to $19.6 million or 36.9% of revenue in Q1 of the prior year due to higher R&D spending. Looking ahead, we continue to expect non-GAAP operating expenses to range from $24 million to $26 million per quarter to account for the acceleration of R&D expenses to improve time to market for our 800G and 1.6 terabit data center products.
Non-GAAP operating loss in the first quarter was $17.1 million compared to an operating loss of $7.2 million in Q1 in the prior year. GAAP net loss for Q1 was $23.2 million or a loss of $0.6 per basic share compared with a GAAP net loss of $16.3 million or a loss of $0.56 per basic share in Q1 of 2023.
On a non-GAAP basis, net loss for Q1 was $12 million or $0.31 per share, which was within our guidance range of a loss of $10.9 million to a loss of $12.6 million and in line with our guidance range of a loss per share in the range of $0.28 to a loss of $0.33 per basic share. This compares to a net loss of $7.1 million or a loss of $0.25 per basic share in Q1 of the prior year. The fully diluted shares outstanding used for computing the earnings per share in Q1 were 38.4 million.
Turning now to the balance sheet, we ended the first quarter with $17.4 million in total cash, cash equivalents, short-term investments and restricted cash. This compares with $55.1 million at the end of the fourth quarter. This cash balance reflects a few slow-paying AR receipts totaling about $11 million, which were subsequently received in the first two weeks of Q2.
Also note that we used almost $4 million in cash to reduce debt during the quarter. We ended the quarter with total debt excluding convertible debt of $34.8 million compared to $38.7 million at the end of last quarter. As of March 31, we had $54.3 million in inventory compared to $63.9 million at the end of Q4. We made a total of $7.8 million in capital investments in the first quarter, which was mainly used for production and R&D equipment.
Moving now to our Q2 outlook. We expect Q2 revenue to be between $41.5 million and $46.5 million and non-GAAP gross margin to be in the range of 25.5% to 27.5%. Non-GAAP net loss is expected to be in the range of $11.6 million to $13.5 million and non-GAAP loss per share between $0.29 per basic share and $0.34 per basic share, using a weighted average basic share count of approximately 39.2 million shares.
Looking ahead, as the widespread adoption of generator AI continues to place increased demands on our customer data centers, we believe these customers will ultimately need to deploy more infrastructure to meet these needs, which will provide a long tailwind of demand for the optical industry. Our US-based production ability, combined with our automated manufacturing capabilities and experience, puts us in a unique competitive position to address these needs.
Further, as our CATV customers transition to next-generation architecture and implement new technologies like DOCSIS 4.0, we believe that we have positioned ourselves as a leader in technologies that will enable DOCSIS 4.0. And we are confident that we have the right product portfolio, team, and strategy in place to capitalize on this upcoming transition. We have spent several years developing these products, and we expect that they will go to market in the next few months.
In sum, we believe that the long-term demand drivers remain strong for both our data center and CATV businesses. And we believe we are well positioned to benefit from these growing long-term trends.
With that, I will turn it back over to the operator for Q&A session. Operator?

Question and Answer Session

Operator

Thank you. We will now begin the question-and-answer session. (Operator Instructions)
Simon Leopold, Raymond James.

Simon Leopold

Hey, thanks for taking the question. A couple of quick ones maybe. I think on the prior conference call, you had given us some indication that you thought the full-year revenue could exceed $300 million.
Given the slower start to the year, it does sound like you still expect a much stronger second half, but how do you feel about that full-year $300 million target?

Stefan Murry

Well, what we've said is that we think we can be profitable for the year. And so, you know, if you can run the numbers on that, we don't give annual guidance really. So I wouldn't say we're pulling back on anything. It's obviously going to be a little more challenging considering where we started the year. But I think it's still very early achievable, let's say that.

Simon Leopold

Okay. And then you did give us some indication of the operating expense expectations for the year at that $24 million to $26 million per quarter. And I think we were anticipating more of a $22 million to $24 million per quarter, and that may simply be just extrapolating too much from the first-quarter forecast. Did something change in terms of your expectation of what you need to spend on sales and marketing and R&D?

Stefan Murry

As we noted in our prepared remarks, we've increased our R&D spend a little bit. Because as I talked about, we're getting customers that are pulling in their request for product development months ahead of schedule. And so we need to spend additional R&D.
I wouldn't say it's additional overall, but we're spending it quicker than we otherwise would. So it does represent a slight increase to our R&D. Sales and marketing, not so much increase in sales and marketing.

Simon Leopold

And then I remember at our meeting, you had talked about sort of a product roadmap going from the VCSL-based solutions to VCSLs and EMLs and ramping up to a higher per channel speed. Could you give us an overview of the roadmap you expect in terms of launches over the next year plus?

Thompson Lin

So the VCSL-based products are already in production and we'll likely add higher speed lane VCSLs to that portfolio next year. With respect to the EML-based products, we have some products in production now. The higher speed data center products with EMLs will go into production late Q3, early Q4.

Simon Leopold

And what was your 400G in the quarter? I missed that.

Thompson Lin

17% of the data center revenue, so $29 million, 70% of that.

Simon Leopold

Okay. And that was just 400G, not about 400 --

Thompson Lin

(multiple speakers) over doubling.

Simon Leopold

Can you say that again?

Thompson Lin

That's a little overdoubling compared -- that is almost -- well, this was slightly over doubling from same period last year.

Simon Leopold

Great. Thank you very much for taking the questions. Appreciate it.

Operator

Michael Genovese, Rosenblatt Securities.

Michael Genovese

Great, thanks. And I guess let's just start with I wanted to ask some questions about Microsoft. If you had any more color on why you think that it's going slower than initially expected. But then secondly, how do you expect orders to trend in the second quarter? Or do you see orders in the month of June being above the month of May? Is there any visibility to that?
And then finally, it sounds like your comments on the overall size of this of $300 million-plus has maybe gotten a little bit more bullish, but maybe that's because you've added 800G to it. So if you could help us understand that as well. Thank you.

Stefan Murry

Sure. (multiple speakers) I'm sorry, what?

Michael Genovese

I was just reminding the first one was why the delay?

Stefan Murry

Yes, I wouldn't really say it's an overall delay. If my prepared remarks sounded that way, that's not what I was trying to say. There was a slight delay in one particular program, which really just reflects the fact that it's a new product and sometimes new product launches just take a little longer than expected. There's nothing particular that I can point to with respect to that.
It is positive that we're getting a new updated forecast now that would indicate shipments beginning later in Q2 and then ramping quickly in Q3 and Q4. So that's all positive. I wouldn't read much into the delay.
Overall, the revenue in our data center business is about where we expected it to be in Q2. So there's not really a significant change from our earlier thinking. That small delay in the business from Microsoft is being more than compensated by other data center customers. So it's not anything overall that I'm trying to point to there. Just that one particular product has got somewhat of a delay.
Your second question had to do with the $300 million target and whether that represents a change. No, fundamentally, other than that we mentioned that we're having to pull an 800G and 1.6 terabits faster. And that 1.6 terabits won't be a factor this year, but it will be early next year. But the acceleration in 800G is certainly helpful to trying to meet that goal.
And then I'm sorry, I forgot your third question there. What was it?

Michael Genovese

Well, I'll add that in with my next and last question. But it was about the orders, if, for instance, you think that -- if there's a reason to think as you're seeing these forecasts that (inaudible) June would be up from May, which is up from April, if you're seeing that kind of trend at this customer.
But I might well just ask, I mean, you said the 1Q data center revenues were about where you expected them to be. How do you see them trending in 2Q and 3Q, if you could address that? And then I guess --

Stefan Murry

I want to be clear. Yes. Well, first of all, maybe I misspoke earlier, Q1 and Q2 data center numbers are about what we expected it to be. Cable TV in Q2 is coming in a little lighter than what we had expected. And that explains to the extent that we didn't give guidance until now in Q2. But to the extent that there were some change in our thinking, it had to do with cable TV, not data center.
Data center overall is doing almost -- actually slightly ahead of plan compared to where we thought it was going to be. I mentioned earlier, Microsoft had a delay in one product, but the rest of them are going fine and that slightly and that one product is more than compensated for in Q2 by growth in other customers.

Thompson Lin

(inaudible) overall (inaudible) we feel more positive right now compared to a few months ago. The main reason is (inaudible). Right now, I think the unless we can see several big customer, especially to have a SkyTerra customer are poor in the schedule for energy.
Our cable TV, you know cable TV is quite small because all of us are waiting for 1.0 mg product sold. You know, usually the delay in cable TV is not surprising as you can see from other customers.

Stefan Murry

Michael, I just want to touch on your last question there. I'll try to answer it directly. Are we seeing a trend of more orders kind of month by month? And the answer is yes. As I mentioned earlier, you know that one program, for example, from Microsoft, it's somewhat delayed.
We do expect it to pick up towards the end of this quarter. So that would mean June month would be bigger than May, and that was certainly bigger than April. So we are seeing that trend with that product. But overall, we expect to see that trend somewhat throughout the quarter. Although, again, I would say for the most part, the data center business outside some of these new programs, and especially, the 800G products later in the year, it's relatively consistent business.

Michael Genovese

Okay, great. I'll pass over now. I might come back later or save my questions for offline. Thank you.

Stefan Murry

Sounds great. Thank you.

Operator

Tim Savageaux, Northland Capital Markets.
Tim, your line maybe muted.

Tim Savageaux

Yeah. Sorry about that. I'm here. Can you hear me?

Stefan Murry

Yes, we can hear low.

Tim Savageaux

All right, great. So I'd say with the new OpEx forecast, it seems like maybe in something reasonably over $300 million is what you would need to get you there. And so that's a pretty significant ramp in the second half, almost 3x over the first.
Although, we've seen that recently, couple of different places and most recently at Coherent. So I guess as you look at that ramp and the 800G opportunities in particular, I'm hoping you might be able to size those for us in a fashion, maybe similar or analogous to how you've been talking about Microsoft 400G opportunity? That's one question.
And you've talked about new data center customers or some old data center customers coming back. Should we assume this discussion around 800G and 1.60T also applies to Microsoft? Or is it more focused on the new players?

Stefan Murry

No. I mean, we specifically -- maybe I wasn't totally clear from the prepared remarks. But our existing customers that we have now plus the new customers for those 800G and 1.6 terabit products. So Microsoft clearly would be included in the category of existing customers.
And as far as the size of the market, what we're seeing right now is that 800G is several times as large as the 400G opportunity. So it represents a dramatic expansion. And that's within the same customer. If you add on the new customers that we're referring to, the market size there gets commensurately larger.

Tim Savageaux

Great. So as you look at that data center ramp into the second half, I mean, would you imagine between your current 400G -- would you imagine that to be, I don't know, have 800G? Or how are you looking at it now? And to what extent are you looking at a material cable TV network and contribution in the second half as part of that ramp?

Stefan Murry

Yes, I think that's the key point really, is the cable TV has been kind of -- to the extent that there's been a disappointment in Q2. It's mainly the cable TV is ramping slower than we expected, and that's just -- as Thompson mentioned, somewhat that's par for the course.
I mean, we were optimistic that the MSOs would move a little faster in the 1.8, but has taken a little longer to get through the qualification, get all the necessary training, and what have you done. But we do expect them to ramp in the second half of the year, and that will contribute meaningfully towards the revenue ramp. But it also help us improve the gross margin, which is significantly higher in the cable TV segment than it is.

Thompson Lin

And I can add one thing is for the 800G business, we can see -- we had discussion with, I think, three, four customer for sure, including Microsoft. So I would say more than $500 or $600 million next year for 800G.

Tim Savageaux

Thomas, is that in the aggregate or what kind of time period or maybe we can -- or can we put some more brackets around that $500 million, $600 million I think I heard you say?

Thompson Lin

On, I think we are doing quite (inaudible). I think we should get stuff in order by late Q3. So it's our model next year, Q1 to Q4 next year, I would say. Just 800G only is more than $500 million or even $600 million for AOI based on this --

Tim Savageaux

And that was going to be my last question, actually, in terms of the nature of these detailed discussions and kind of -- does that around qualification or where do we stand on that front? Are we talking about putting the dotting the Is and crossing the Ts on contracts? A little more color there.

Stefan Murry

Well, I'm not sure to what extent the contracts really come into play there. What we're talking about now is we're planning around deployment scenarios, when they're going to do products, how much product they're going to need, pricing, that sort of thing.

Tim Savageaux

Okay.

Stefan Murry

The commentary from the customers is how fast can you deliver X amount of product to for us, right? It's about how fast can we be ready to deploy or to manufacture the products that they need to deploy.

Thompson Lin

And the very important key, as I say, is AOI has -- have been in best few hundred million dollar in the past as in more than 10 years of automation, including a lot of our own equipment automations. So I think right now, we are doing a phase two, maybe I would say we do phase two light -- phase three light by end of this year and do a phase three fully.
I mentioned Q1, Q2 next year. So we can do 800G manufacture in Houston with, I would say, similar or higher costs than in Taiwan and China. That's very attractive to the customer, including the big customer what we used to have several years ago. They're coming back.
Number two, the key is the data is a key component, a key technology, the 100G 200G, the VCL, the EML. And I think [we could automate] in Houston. It's also very key factor for the customer as it is for sure is not only the cost -- the key is the risk management.

Tim Savageaux

Great. Thanks very much.

Operator

(Operator Instructions)
Dave Kang, B. Riley FBR.

Dave Kang

Thank you. Good afternoon. So regarding the 800G, first question is: do you have a 200 G per lane VCSLs and YML? So what's the status on that?

Thompson Lin

We will have -- the volume effect should be more like Q1 next year. Right now, unit goes through the whole R&D, especially I think because we are very concerned about quality but that's all 1.6T (inaudible) and the (inaudible).
And I'm talking about is the 800G, I'm talking about the opportunity for AOI, the $500 million to $600 million or higher, that's (inaudible). It's like 2 kilometer [highway]. It's not an actual reach. It's AOC. It's pretty HGMP, high gross margin product. Okay?
The 1.60T, as in early next year, is more lighter. It would be the multi-mode and single-mode together. But for shorter distance, maybe we'll find a midterm (inaudible), but we will have all of them pretty soon.

Dave Kang

Got it. And then sticking with 800G, I think you said something like maybe two customers that will ramp third quarter. Just wondering if you've been qualified or that (inaudible) appeals already?

Thompson Lin

The reason (inaudible) Q3 or Q4. Do you know we are doing quite (inaudible). So it's a single (inaudible), 2 kilometer and higher including the PIA and two by FIFO. So I would say, more than two customers. A hyperscaler, I would say maybe three customer, including, I guess, some others, similar costs. (inaudible) picture, for sure, they're going to push in Q3. So we are trying our best to catch up the body. It's a Q4 for sure. Q3 schedule, it's a bit tight, maybe September.

Dave Kang

Got it. And then regarding your press release at the beginning of OFC about that 800G AOC that you jointly develop with Credo, can you just give more color exactly what they provide and what you guys provide? And where are we as far as sampling or even going to production?

Stefan Murry

So Credo makes the DSP and we make an active optical cable around it. And we haven't commented on any production schedules for it.

Dave Kang

Okay. Thank you.

Operator

This concludes our question-and-answer session. I would like to turn the conference back over to Dr. Thomas Lin. Please go ahead, sir.

Thompson Lin

Okay. Thank you for joining us today. As always, we want to extend a thank you to our investors, customers, and employees. We will continue to follow. As we discussed today, we believe the long-term demand driver remains strong for both our data center and CATV business and we believe we are well positioned to capitalize on this opportunity. Thank you.

Operator

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