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| Statement |
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| I couldn't feel better about our strategic position and I believe we remain well-positioned to deliver our seventh consecutive year of revenue growth, expand margins by approximately 200 basis points, and deliver EPS growth of at least 25% in 2024 |
| And so that will be a margin benefit leading to that 200 basis point improvement for internal consumption |
| Overall, the fourth quarter was a strong quarter for us, in which the midpoint of our preliminary revenue, gross margin, and EPS ranges are all expected to come in above our outlook ranges |
| So the external sales of pluggables like to the web scaler that Ron went through, very exciting |
| Furthermore, during the quarter, our GX Systems portfolio performed strongly, landing new Tier 1 design wins with global service providers and ICPs |
| In terms of gross margin relative to Subsystems, it's going to be - it'll be modest, right? There's not going to be a big step up that you'll see in '24, but really as David mentioned, with some of the wins that we see, it's a '25 benefit to us as we start to see that revenue really step up and the opportunities that we're seeing are giving us more and more confidence, in particular in terms of the funnel that we see |
| For the full-year 2023, we expect to deliver our sixth consecutive year of revenue growth, expand gross margins to approximately 40%, expanded operating margins, and increased operating profit in the double-digit percentage range, and delivered EPS in the 20% to 25% range |
| And you also mentioned very significant share gains over a period of number of years with this group of customers |
| And nice but still modest 200 basis point margin expansion |
| Given the headwinds that we're seeing, you know, structurally in the industry this year, but the big design wins in hyperscale that we talked about and further to come, I know it's only March of '24, but the strength that you were talking about in '25, you should be able to grow the top line double-digit plus in calendar '25, right? David Heard Well, that was a trap |
| Our win rate in the Metro remains strong with revenue in this segment growing to almost 50% of product revenue in 2023, an important part of our investment thesis and forward opportunity with the Huawei situation |
| But I think what we've said prior, is past this inventory digestion period, we're going to continue to put our heads down, get design wins, continue to drive margin improvement and EPS expansion |
| hyperscalers and delivered our fourth consecutive year of 30-plus revenue growth in this segment |
| This gives us great comfort, both in that and as well as in our business model, from a financial perspective in terms of margin and EPS |
| Again, I think we've been very diligent over the last couple of years, and are very well positioned, but we're not allowed by actual rules of the CHIPS Act, to give a status on where we're at there |
| What I'm confident is we're an excellent fit for the CHIPS Act, and that as they go to push awards out, that should be something we see in the '25 timeframe as well in terms, of the impact to the business, if we are to be awarded |
| We hit several important milestones in the year with gross margin approaching 40%, bookings exceeding $10 million for our Subsystems products, vertical integration in the mid-50th percentile for the company, and we proactively strengthened our balance sheet |
| Our consistent performance over the past few years highlights that our strategy is working and that our portfolio is in the best shape it's ever been, as evidenced by our win rates |
| Our key growth and profitability financial metrics are trending up and to the right, and we feel great about the underlying long-term secular drivers in the business |
| This is ultimately a good news story in the back half of the year and for the longer term |
| The good news here is our commercial wins and strategic deployments give me confidence that we remain on path to deliver a full year of revenue growth and expanded margins in 2024 with gross margins expected to return to 40% plus starting in Q2 |
| As I close today, I would like to reiterate that I'm pleased with our '23 performance for the full year |
| Expand gross margin by approximately 200 basis points for the year and earnings per share expansion with EPS growth of at least 25% in 2024 |
| I'm encouraged by the growth of our sales funnel and the margins on our bookings, which I believe puts us on a path to drive revenue growth of 2% to 3% for the full year and deliver on our seventh consecutive year of revenue growth |
| We've already landed wins with five service providers and hyperscalers that are expected to lead to significant revenue and margins with follow-on transponder sales, and we have a strong pipeline of additional customers |
| We are winning some major design wins in both systems, and subsystems that build our - competence and confidence in the back half recovery |
| In the first 60 days of the quarter, I am encouraged by our win rate deployment of line systems, setting us up for future margin expansion |
| These pluggable wins will drive additional volume through our U.S.-based semiconductor manufacturing assets and be incrementally accretive to the financial model |
| As you heard from us this afternoon, overall, we feel great about our strategy and the strength of our portfolio, as evidenced by the pace and scale of recent design wins across both our Systems and Subsystems portfolios |
| Our portfolio is in the best shape it's been |
| Statement |
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| This lower margin includes a 400 basis point margin impact, primarily from higher line system shipments with fill expected in the following quarters and from lower volumes in Q1 |
| In Q1 In particular, we're experiencing a temporary low point in revenue and margin driven by two factors |
| But we're starting with a bad quarter in 1Q for some specific reasons |
| As David mentioned, like the rest of the industry, we are expecting a slow start to the year as our customers continue to work down their excess inventory and manage CapEx prudently in the short term |
| I would imagine there's a bit of seasonality here, but I think the narrative is really around excess inventory |
| The second part of the question is, look, I think we have been saying consistently that we thought this year the front half would be softer than the back half because from our - not from analyst reports, from our direct contact with both CSPs, wholesalers, ICPs, cable operators, we do think as we get into the back half and look, based on some of the infrastructure wins we're getting now, we believe that the spend and the inventory situation frees up in the back half |
| Well, the front half of the year, is starting off a bit sluggish, which we called out, last year as this inventory burns out |
| And second, from a margin standpoint, we expect gross margin to be approximately 400 basis points lower in Q1 due to a 300 basis point impact from the timing impact of higher line system shipments in Q1 associated with many of our global Tier 1 customer wins |
| You're starting the first quarter at a lower gross margin than we envisioned |
| Finally, we are anticipating a net loss per share of $0.18 to $0.10 assuming a basic share count of approximately 232 million shares |
| However, in the near term, as we look at the first half of 2024, we're planning for a slow start to the year consistent with what our peers in the industry are seeing and communicating |
| And they're also being a bit cautious on setting their budgets |
| And Q1 is always in our industry and for our company is always our toughest quarter |
| Since our efforts over the past few months have been directed toward completing the work necessary to file our Q3 '23 results and other related SEC filings, our final results for Q4 '23 and fiscal year '23 have been delayed |
| Operating expenses to be in the range of $143 million to $147 million, including approximately $3 million of incremental expenses related to support our fiscal '23 audit and an operating margin loss of 8.5% |
| And I guess, as I think about it, the excess inventory issue has been around for a few quarters now |
| We've been winning these long-term strategic deals in quarter, but the book-ship business has been a bit slower as some of our customers as everybody is aware of are continuing to burn down inventory, which we think is about the end of the story as we get out of the first half |
| And a 100 basis point impact from the combined effects of lower volume in Q1 |
| While capital markets and macroeconomic conditions were challenging throughout 2023, we kept our heads down and believe we've delivered on our commitments to you |
| I apologize for that |
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