What changed in APPLIED OPTOELECTRONICS, INC.'s 10-K — 2023 vs 2024
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Paragraph-level year-over-year comparison of APPLIED OPTOELECTRONICS, INC.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.
+252 added−220 removedSource: 10-K (2025-02-28) vs 10-K (2024-02-23)
Top changes in APPLIED OPTOELECTRONICS, INC.'s 2024 10-K
252 paragraphs added · 220 removed · 177 edited across 7 sections
- Item 7. Management's Discussion & Analysis+109 / −104 · 85 edited
- Item 1A. Risk Factors+77 / −53 · 41 edited
- Item 1. Business+48 / −48 · 39 edited
- Item 7A. Quantitative and Qualitative Disclosures About Market Risk+6 / −8 · 6 edited
- Item 2. Properties+5 / −4 · 3 edited
Item 1. Business
Business — how the company describes what it does
39 edited+9 added−9 removed121 unchanged
Item 1. Business
Business — how the company describes what it does
39 edited+9 added−9 removed121 unchanged
2023 filing
2024 filing
Biggest changeOur Strategy We seek to be the leading global provider of optical components, modules and equipment for each of our four target markets: internet data centers, CATV, telecom and FTTH. Our strategy includes the following key elements: ‑ Continue to penetrate the internet data center market.
Biggest changeIn addition, we have developed many automated processes used in our production which we believe give us advantages in terms of scalability and control of labor costs. Our Strategy We seek to be the leading global provider of optical components, modules and equipment for each of our four target markets: internet data centers, CATV, telecom and FTTH.
In order to meet these demands, many equipment vendors have looked to engage with suppliers like us who have the capability to design and manufacture various network equipment or subassemblies, rather than always developing these devices themselves. This outsourcing trend has been a significant contributor to the revenue we derive from the CATV market.
In order to meet these demands, many equipment vendors have looked to engage with suppliers like us who have the capability to design and manufacture various network equipment or subassemblies, rather than developing these devices themselves. This outsourcing trend has been a significant contributor to the revenue we derive from the CATV market.
We begin from the fundamental building blocks of lasers and laser components. From these foundational products, we design and manufacture a wide range of products from optical modules to complete turn-key equipment. We design our products to target customers in our identified markets to meet their needs and specifications.
We commonly begin from the fundamental building blocks of lasers and laser components. From these foundational products, we design and manufacture a wide range of products from optical modules to complete turn-key equipment. We design our products to target customers in our identified markets to meet their needs and specifications.
In our China facility, we take advantage of lower labor costs and manufacture certain more labor intensive components and optical equipment systems, such as optical subassemblies and transceivers for the CATV transmitters (at the headend), internet data center market, and CATV outdoor equipment (at the node).
In our China facility, we take advantage of lower labor costs and manufacture certain more labor intensive components and optical equipment systems, such as optical subassemblies and transceivers for the CATV transmitters (at the headend), internet data center market, and CATV outdoor equipment).
Over and above our commitment to compliance with all environmental laws, we have further committed ourselves to the following environment goals: ● Obtain at least 20% of the energy used in our operations from renewable sources ● Properly recycle waste materials including paper, electronic components, glass and batteries ● Reduce our generation of hazardous waste by at least 10% over the five year period beginning in 2021 In order to meet these goals, we maintain an Integrated Environmental and Safety Management System.
Over and above our commitment to compliance with all environmental laws, we have further committed ourselves to the following environment goals: ● Obtain at least 20% of the energy used in our operations from renewable sources ● Properly recycle waste materials including paper, electronic components, glass and batteries ● Reduce our generation of hazardous waste by at least 10% over the five year period beginning in 2024 In order to meet these goals, we maintain an Integrated Environmental and Safety Management System.
These operators have adopted more open internet data center architectures and have designed their own networking equipment, both of which use a mix of systems and components from a variety of vendors. We have benefited from these trends over the past several years, and expected to continue to benefit from them.
These operators have adopted more open internet data center architectures and have designed their own networking equipment, both of which use a mix of systems and components from a variety of vendors. We have benefited from these trends over the past several years, and we expect to continue to benefit from them.
We design and manufacture a range of optical communications products at varying levels of integration, from components, subassemblies and modules to complete turn-key equipment. In designing products for our customers, we generally begin with the fundamental building blocks of lasers and laser components.
We design and manufacture a range of optical communications products at varying levels of integration, from components, subassemblies and modules to complete turn-key equipment. In designing products for our customers, we typically begin with the fundamental building blocks of lasers and laser components.
We serve a majority of the largest CATV equipment manufacturers in the world and our knowledge of both their requirements and the needs of their customers (the CATV network operators) allows us to access these new opportunities. ‑ Vertically integrated, geographically distributed manufacturing model.
We serve a majority of the largest CATV equipment manufacturers in the world and our knowledge of both their requirements and the needs of their customers (the CATV network operators) allows us to access these new opportunities. ‑ Vertically integrated, highly automated and geographically distributed manufacturing model.
We also from time to time offer design or manufacturing services to customers to assist them in more effectively using our products and realizing time-to-market advantages. In the last five years, we have taken several actions to increase the diversity of our customer base.
We also from time to time offer design or manufacturing services to customers to assist them in more effectively using our products and realizing time-to-market advantages. In the last six years, we have taken several actions to increase the diversity of our customer base.
We intend to continue to invest in new products, new technology and our production infrastructure and facilities to maintain and strengthen our competitive position. We engage in an active research and development program to develop new products and enhance existing products. ‑ Selectively pursue other opportunities that leverage our existing expertise.
We intend to continue to invest in new products, new technology and our highly-automated production infrastructure and facilities to maintain and strengthen our competitive position. We engage in an active research and development program to develop new products and enhance existing products. ‑ Selectively pursue other opportunities that leverage our existing expertise.
We intend to add to our product portfolio in the CATV market following our recent launch of our own branded products to sell directly to MSOs, which we believe offers us further opportunity to enhance our presence as a supplier in the CATV market. ‑ Continue to invest in our capabilities and infrastructure.
We intend to add to our product portfolio in the CATV market following our recent launch of our own branded products to sell directly to MSOs, which we believe offers us further opportunity to enhance our presence as a supplier in the CATV market. ‑ Continue to invest in our capabilities, especially our automated module production, and infrastructure.
In 2023, we began offering many of our CATV products directly to CATV multiple system operator ("MSO") customers, under the newly-created Quantum Bandwidth™ brand name.
In 2023, we began offering many of our CATV products directly to MSO customers, under the newly-created Quantum Bandwidth™ brand name.
In our Taiwan location, we manufacture optical components, such as our butterfly lasers, which incorporate laser chips, subassemblies and components manufactured within our Sugar Land facility. In addition, in our Taiwan location, we manufacture transceivers for the internet data center, telecom, FTTH and other markets.
In our Taiwan location, we manufacture optical components, such as our butterfly lasers, which incorporate laser chips, subassemblies and components manufactured within our Sugar Land facility. In addition, in our Taiwan location, we manufacture transceivers for the internet data center, telecom, FTTH and other markets. We also manufacture CATV outdoor equipment including amplifiers.
Seasonality See Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Seasonality,” regarding seasonality of certain of the Company’s products. 10 Table of Contents Human Capital Employees As of December 31, 2023 , we employed 2,149 full-time employees, of which 37 held Ph.D. degrees in a science or engineering field.
Seasonality See Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Seasonality,” regarding seasonality of certain of the Company’s products. 10 Table of Contents Human Capital Employees As of December 31, 2024 , we employed 3,309 full-time employees, of which 49 held Ph.D. degrees in a science or engineering field.
As the complexity of CATV networks has increased over the years, equipment vendors, many of whom are our customers, have been under pressure to supply a wider variety of increasingly complex equipment to CATV multiple system operators (“MSOs”).
As the complexity of CATV networks has increased over the years, equipment vendors, many of whom are our customers, have been under pressure to supply a wider variety of increasingly complex equipment to MSOs.
We generally employ a direct sales model in North America and in the rest of the world we use both direct and indirect sales channels. In 2023, 2022 and 2021 , we obtained 88.6%, 99.6%, and 98.01% of our revenue, respectively, through our direct sales efforts and the remainder of our revenue through our indirect sales channels.
We generally employ a direct sales model in North America and in the rest of the world we use both direct and indirect sales channels. In 2024, 2023 and 2022 , we obtained 64.4%, 88.6% and 99.6% of our revenue, respectively, through our direct sales efforts and the remainder of our revenue through our indirect sales channels.
We design and sell products at the level of integration desired by a customer, from components to turn-key equipment, providing our customers a dependable, cost-effective and simplified supply chain. ‑ Deliver high quality, reliable products in high volume.
We design and sell products at the level of integration desired by a customer, from components to turn-key equipment, providing our customers a dependable, cost-effective and simplified supply chain.
In 2023 , revenue from the internet data center market, CATV market, telecom market, FTTH market and other markets provided 64.9%, 27.5%, 6.4%, 0.0% and 1.2% of our revenue, respectively, compared to 34.6%, 53%, 11.1%, 0.1% and 1.2%, respectively, in 2022 .
In 2024 , revenue from the internet data center market, CATV market, telecom market, FTTH market and other markets provided 59.5%, 35.2%, 4.4%, 0.0% and 0.9% of our revenue, respectively, compared to 64.9%, 27.5%, 6.4%, 0.0% and 1.2%, respectively, in 2023 .
In 2023 , 2022 , and 2021 , ATX accounted for 15.6%, 47.3%, and 25.6% of our revenue, Digicomm accounted for 11.3%, 0%, and 0% of our revenue, and a U.S. based large CATV equipment provider accounted for 1.3%, 1.7%, and 3.3% of our revenue, respectively. 4 Table of Contents Industry Background During 2023 , our four target markets, internet data center, CATV, telecom and FTTH, experienced a significant growth in bandwidth consumption and the corresponding need for network infrastructure improvement to support this growth.
In 2024 , 2023 , and 2022 , Digicomm accounted for 34.1%, 11.3% and 0% of our revenue and ATX Networks accounted for 0%, 15.6% and 47.3% of our revenue, respectively. 4 Table of Contents Industry Background During 2024 , our four target markets, internet data center, CATV, telecom and FTTH, experienced a significant growth in bandwidth consumption and the corresponding need for network infrastructure improvement to support this growth.
Our Solutions We experience certain challenges within our target markets, including continuous pressure to innovate and deliver highly integrated products that perform reliably in harsh, demanding environments and to produce high-quality devices in large volumes at competitive prices.
We see opportunities with these customers particularly given our knowledge and experience in CATV. Our Solutions We experience certain challenges within our target markets, including continuous pressure to innovate and deliver highly integrated products that perform reliably in harsh, demanding environments and to produce high-quality devices in large volumes at competitive prices.
Manufacturing and Operations We have three manufacturing sites: Sugar Land, Texas, Ningbo, China and Taipei, Taiwan. Our research and development functions are generally partnered with our manufacturing locations, and we have an additional research and development facility in Duluth, Georgia. In our Sugar Land facility, we manufacture laser chips (utilizing our MBE and MOCVD processes), subassemblies and components.
Our research and development functions are generally partnered with our manufacturing locations, and we have an additional research and development facility in Duluth, Georgia. In our Sugar Land facility, we manufacture laser chips (utilizing our MBE and MOCVD processes), subassemblies and components.
We provide mandatory safety trainings in our production facilities, which are designed to focus on empowering our employees with the knowledge and tools they need to make safe choices and to mitigate risks. Supervisors complete safety management courses as well.
We provide mandatory safety trainings in our production facilities, which are designed to focus on empowering our employees with the knowledge and tools they need to make safe choices and to mitigate risks. Supervisors complete safety management courses as well. Compensation, Benefits and Wellness We offer fair, competitive compensation and benefits that support our employees’ overall wellness.
Many of our competitors are larger than we are and have significantly greater financial, marketing and other resources. In addition, several of our competitors have large market capitalizations or cash reserves and are much better positioned to acquire other companies to gain new technologies or products that may displace our products.
In addition, several of our competitors have large market capitalizations or cash reserves and are much better positioned to acquire other companies to gain new technologies or products that may displace our products.
Of our employees, 330 are located in the U.S., 464 are located in Taiwan and 1,355 are located in China. As of December 31, 2023 , none of our employees are represented by any collective bargaining agreement, but certain employees of our China subsidiary are members of a trade union.
Of our employees, 375 are located in the U.S., 698 are located in Taiwan and 2,236 are located in China. As of December 31, 2024 , none of our employees are represented by any collective bargaining agreement, but certain employees of our China subsidiary are members of a trade union.
In 2023, 2022 and 2021 , our revenue was $217.6 million, $222.8 million, and $211.6 million and our gross margin was 27.1%, 15.1%, and 17.8%, respectively. In the years ended December 31, 2023, 2022 and 2021 , we had net loss of $56 million, $66.4 million, and $54.2 million , respectively.
In 2024, 2023 and 2022 , our revenue was $249.4 million, $217.6 million and $222.8 million and our gross margin was 24.8%, 27.1% and 15.1%, respectively. In the years ended December 31, 2024, 2023 and 2022 , we had net loss of $186.7 million, $56.0 million and $66.4 million , respectively.
Trademarks We have registered the trademarks APPLIED OPTOELECTRONICS, INC., AOI, and we have filed for registration of trademark for Quantum Bandwidth with the U.S. Patent and Trademark Office on the Principal Register. These marks are also registered in, or have applications for registration pending in, various foreign trademark offices.
Trademarks We have registered the trademarks APPLIED OPTOELECTRONICS, INC., AOI, and Quantum Bandwidth with the U.S. Patent and Trademark Office on the Principal Register. These marks are also registered in, or have applications for registration pending in, various foreign trademark offices. Manufacturing and Operations We have three manufacturing sites: Sugar Land, Texas, Ningbo, China and Taipei, Taiwan.
Compensation, Benefits and Wellness We offer fair, competitive compensation and benefits that support our employees’ overall wellness. Further, the health and wellness of our employees are critical to our success. We provide our employees with access to a variety of innovative, flexible and convenient health and wellness programs.
Further, the health and wellness of our employees are critical to our success. We provide our employees with access to a variety of innovative, flexible and convenient health and wellness programs.
At December 31, 2023 and 2022 , our accumulated deficits were $265.1 million and $209.1 million, respectively. In 2023 , we earned 64.9% of our total revenue from the internet data center market and 27.5% of our total revenue from the CATV market.
At December 31, 2024 and 2023 , our accumulated deficits were $451.9 million and $265.1 million, respectively. In 2024 , we earned 59.5% of our total revenue from the internet data center market and 35.2% of our total revenue from the CATV market. In 2024 , our key customers in the internet data center market included Microsoft and Oracle .
The rapid adoption of AI is fueling a new wave of investment by hyperscale data center operators, as AI computing is very compute and bandwidth intensive. 3 Table of Contents The CATV market is our second largest and the most established market, for which we supply a broad array of products, including lasers, transmitters and transceivers, and turn-key equipment.
In addition, we believe that the significant automation employed in our production process for data center optical modules gives us advantages over our competitors in the ability to scale production rapidly, which is beneficial because the rapid adoption of artificial intelligence ("AI") is fueling a new wave of investment by hyperscale data center operators, as AI computing is very compute and bandwidth intensive. 3 Table of Contents The CATV market is our second largest and the most established market, for which we supply a broad array of products, including lasers, transmitters and transceivers, and turn-key equipment.
In 2023 , the three customers who contributed most to our data center revenue were Microsoft, a U.S. based large data center operator and a China based manufacturer. In 2023, our three largest CATV customers were ATX, Digicomm and a U.S. based large CATV equipment provider.
In 2024 , the three customers who contributed most to our internet data center revenue were Microsoft, Oracle and a U.S. based manufacturer. In 2024, our largest CATV customer was Digicomm.
We also see opportunities for 10 Gbps Ethernet Passive Optical Network ("EPON") and higher data rate PON networks in the future. Also, we have seen trends towards cable television MSOs beginning to deploy PON networks. We see opportunities with these customers particularly given our knowledge and experience in CATV.
We also see opportunities for 10 Gbps Ethernet Passive Optical Network ("EPON") and higher data rate PON networks in the future. We have also developed solutions for 25 Gbps PON networks and 50 Gbps PON networks, which we believe will one day be adopted by customers. We have seen trends towards cable television MSOs beginning to deploy PON networks.
We do not anticipate any material effect on our business due to any patents expiring in 2024, and we continue to obtain new patents through our ongoing research and development.
While our patents are an important element of our success, our business as a whole is not dependent on any one patent or group of patents. We do not anticipate any material effect on our business due to any patents expiring in 2024, and we continue to obtain new patents through our ongoing research and development.
Intellectual Property We rely on a combination of patent, copyright, trademark, trade secret laws and unfair competition laws, as well as confidentiality and licensing arrangements, to establish and protect our intellectual property.
By purposefully fostering this close collaboration, we believe that we can more rapidly develop leading solutions meeting the needs of our customers. Intellectual Property We rely on a combination of patent, copyright, trademark, trade secret laws and unfair competition laws, as well as confidentiality and licensing arrangements, to establish and protect our intellectual property.
Our major competitors in one or more of our markets include Finisar Corporation who was acquired by II-VI Incorporated, Foxconn Interconnect Technology Ltd., InnoLight Technology (Suzhou) Ltd., Intel Corporation, Lumentum Holdings, Inc., Mitsubishi, Molex, LLC, Source Photonics, Inc. and Sumitomo Electric Industries, Ltd.
Our major competitors in one or more of our markets include Coherent Corporation, Foxconn Interconnect Technology Ltd., InnoLight Technology (Suzhou) Ltd., Intel Corporation, Lumentum Holdings, Inc., Mitsubishi, Molex, LLC, Source Photonics, Inc. and Sumitomo Electric Industries, Ltd. Many of our competitors are larger than we are and have significantly greater financial, marketing and other resources.
Our research and development teams collaborate on joint projects, and by co-locating with our manufacturing operations enable us to achieve an efficient cost structure and improve our time to market. A key factor in our research and development success is our highly collaborative process for new product development.
We have research and development departments in our facilities in Texas, Georgia, China and Taiwan. Our research and development teams collaborate on joint projects, and by co-locating with our manufacturing operations enable us to achieve an efficient cost structure and improve our time to market.
As of December 31, 2023 , we had a total of 233 employees working in the R&D department, including nine with Ph.D. degrees. We continue to recruit talented engineers to further enhance our research and development capabilities. We have research and development departments in our facilities in Texas, Georgia, China and Taiwan.
As a result of these efforts, we anticipate releasing various new or enhanced products over the next several years. As of December 31, 2024 , we had a total of 284 employees working in the R&D department, including 12 with Ph.D. degrees. We continue to recruit talented engineers to further enhance our research and development capabilities.
While we expect our intellectual property to provide competitive advantages, we also find meaningful value from unpatented proprietary process knowledge, know-how and trade secrets. Patents As of December 31, 2023 , we owned a total of 176 U.S. issued patents and 150 patents issued in China and Taiwan, plus a number of pending U.S. and foreign/international patent applications.
While we expect our intellectual property to provide competitive advantages, we also find meaningful value from unpatented proprietary process knowledge, know-how and trade secrets.
Particularly in our equipment and module businesses, we often collaborate very closely with our customers from a very early stage in product development. By purposefully fostering this close collaboration, we believe that we can more rapidly develop leading solutions meeting the needs of our customers.
A key factor in our research and development success is our highly collaborative process for new product development. Particularly in our equipment and module businesses, we often collaborate very closely with our customers from a very early stage in product development.
In 2023, 2022 and 2021 , Microsoft accounted for 46.6%, 18.4% and 14.1% of our revenue, a U.S. based large data center operator accounted for 8.8%, 5.9%, and 8.3% of our revenue, and a China based manufacturer accounted for 3.3%, 1.2%, and 1.2% of our revenue, respectively.
In 2024, 2023 and 2022 , Microsoft accounted for 43.7%, 46.6% and 18.4% of our revenue, and Oracle accounted for 12.4%, 8.8% and 5.9% of our revenue, respectively. In 2024 , our key customer in the CATV market was Digicomm.
Removed
To address this increased bandwidth demand, CATV and telecom service providers are competing directly against each other by providing bundles of voice, video and data services to their subscribers and investing to enhance the capacity, reliability and capability of their networks.
Added
Within the internet data center market, we benefit from the increasing use of higher-capacity optical networking technology as a replacement for older, lower-speed optical interconnects, particularly as speeds reach 800 Gbps and above, as well as the movement to open internet data center architectures and the increasing use of in-house equipment design among leading internet companies.
Removed
Our internet data center market is also experiencing substantial growth as hyperscale data center operators build and upgrade their infrastructure to support artificial intelligence ("AI") applications which are compute and bandwidth intensive.
Added
Within the CATV market, we benefit from a number of ongoing trends including the move to higher bandwidth networks among CATV service providers, especially the desire by CATV multiple system operators ("MSOs") to increase the return-path bandwidth available to offer to their customers.
Removed
As a result of these trends, fiber-optic networking technology is becoming essential in all four of our target markets, as it is often the only economical way to deliver the desired bandwidth. The internet data center market is currently our largest and fastest-growing market.
Added
In the FTTH market, we benefit from continuing passive optical network deployments and system updates among telecom service providers. In the telecom market, we benefit from deployment of new high-speed fiber-optic networks by telecom network operators, including 5G networks. The internet data center market is currently our largest and fastest-growing market.
Removed
In 2023 , our key customers in the internet data center market included Microsoft, a U.S. based large data center operator, and a China based datacenter equipment manufacturer .
Added
We have developed a highly-automated production process for many of our data center products, and we believe that this gives us advantages over many of our competitors in terms of ability to scale production rapidly, as well as being able to locate production in favorable geographic locations while maintaining relatively low production costs.
Removed
In 2023 , our key customers in the CATV market included ATX, Digicomm and a U.S. based large CATV equipment provider.
Added
Our relatively more automated production process for certain optical modules also allows us more freedom in locating our manufacturing operations in customer-favored geographic locations while maintaining relatively low labor costs. ‑ Deliver high quality, reliable products in high volume.
Removed
Examples of equipment include our CATV transmitter and CATV nodes. 7 Table of Contents Research and Development To maintain our growth and competitiveness, we engage in an active research and development program to develop new products and enhance existing products. As a result of these efforts, we anticipate releasing various new or enhanced products over the next several years.
Added
Our strategy includes the following key elements: ‑ Continue to penetrate the internet data center market.
Removed
Our issued U.S. and foreign patents will expire between 2024 and 2043. While our patents are an important element of our success, our business as a whole is not dependent on any one patent or group of patents.
Added
Examples of equipment include our CATV transmitter and CATV nodes.
Removed
In response to the COVID-19 pandemic, we implemented significant changes that we determined were in the best interest of our employees and which comply with government orders in all the states and countries where we operate.
Added
Notwithstanding our expertise in optical transmission equipment, in some cases we utilize our technical expertise in radio frequency ("RF") design to develop products that do not have significant optical technology incorporated, for example our CATV amplifier products which serve to amplify the RF signals in the coaxial-cable portion of an MSO's network do not incorporate optics, but do rely on advanced mixed-signal RF and digital electronic design as well as software and firmware which we develop in house. 7 Table of Contents Research and Development To maintain our growth and competitiveness, we engage in an active research and development program to develop new products and enhance existing products.
Removed
In an effort to keep our employees safe and to maintain operations during the COVID-19 pandemic, we have implemented a number of new health-related measures including, the requirement to wear company provided face-masks at all times while on company property, implemented temperature taking protocols, increased hygiene, cleaning and sanitizing procedures at all Company sites, implemented social-distancing, implemented restrictions on visitors to our facilities, limiting in-person meetings and other gatherings.
Added
Patents As of December 31, 2024 , we owned a total of 188 U.S. issued patents, 137 patents issued in China and Taiwan and 10 patents issued in Europe, plus a number of pending U.S. and foreign/international patent applications. Our issued U.S. and foreign patents will expire between 2025 and 2044.
Item 1A. Risk Factors
Risk Factors — what could go wrong, per management
41 edited+36 added−12 removed195 unchanged
Item 1A. Risk Factors
Risk Factors — what could go wrong, per management
41 edited+36 added−12 removed195 unchanged
2023 filing
2024 filing
Biggest changeThe occurrence of any of these circumstances may adversely affect our financial condition and results of operation. Legal and Regulatory Risks We are subject to governmental export and import controls that could subject us to liability or impair our ability to compete in international markets.
Biggest changeLegal and Regulatory Risks We are subject to governmental export and import controls that could subject us to liability or impair our ability to compete in international markets. We are subject to export and import control laws, trade regulations, and other trade requirements that limit which products we sell and where and to whom we sell our products.
Changes in our products or any change in export or import regulations or related legislation, shift in approach to the enforcement or scope of existing regulations, or change in the countries, persons or technologies targeted by such regulations, could result in delayed or decreased sales of our products to existing or potential customers.
Changes in our products, any change in export or import regulations or related legislation, shift in approach to the enforcement or scope of existing regulations, or change in the countries, persons, or technologies targeted by such regulations could result in delayed or decreased sales of our products to existing or potential customers.
A breach of any of covenants under our loan agreements, or a failure to pay interest or indebtedness when due under any of our credit facilities could result in a variety of adverse consequences, including the acceleration of our indebtedness. We may not be able to obtain additional capital when desired, on favorable terms or at all.
A breach of any of the covenants under our loan agreements, or a failure to pay interest or indebtedness when due under any of our credit facilities could result in a variety of adverse consequences, including the acceleration of our indebtedness. We may not be able to obtain additional capital when desired, on favorable terms or at all.
Our indebtedness could have significant negative consequences for our security holders and our business, results of operations and financial condition by, among other things: - increasing our vulnerability to adverse economic and industry conditions; - limiting our ability to obtain additional financing; - requiring the dedication of a substantial portion of our cash flow from operations to service our indebtedness, which will reduce the amount of cash available for other purposes; - limiting our flexibility to plan for, or react to, changes in our business; - diluting the interests of our existing stockholders as a result of issuing shares of our common stock upon conversion of the 2026 Notes; and - placing us at a possible competitive disadvantage with competitors that are less leveraged than us or have better access to capital.
Our indebtedness could have significant negative consequences for our security holders and our business, results of operations and financial condition by, among other things: - increasing our vulnerability to adverse economic and industry conditions; - limiting our ability to obtain additional financing; - requiring the dedication of a substantial portion of our cash flow from operations to service our indebtedness, which will reduce the amount of cash available for other purposes; - limiting our flexibility to plan for, or react to, changes in our business; - diluting the interests of our existing stockholders as a result of issuing shares of our common stock upon conversion of the 2026 Notes and the 2030 Notes; and - placing us at a possible competitive disadvantage with competitors that are less leveraged than us or have better access to capital.
Our international revenue and operations are subject to several material risks, including: - difficulties in staffing, managing and supporting operations in more than one country; ‑ difficulties in enforcing agreements and collecting receivables through foreign legal systems; ‑ fewer legal protections for intellectual property in foreign jurisdictions; ‑ foreign and U.S. taxation issues and international trade barriers, including the adoption or expansion of governmental trade tariffs, export controls, and fluctuating changes to end-use and end-user rules; ‑ difficulties in obtaining any necessary governmental authorizations for the export of our products to certain foreign jurisdictions; ‑ fluctuations in foreign economies including the impact of recessionary environments and inflation in the United States and other economies where we do business; ‑ fluctuations in the value of foreign currencies and interest rates, including the impact of recessionary environments and inflation in the United States and other economies where we do business; ‑ trade and travel restrictions; ‑ domestic and international economic or political changes, hostilities and other disruptions in regions where we currently operate or may operate in the future; ‑ difficulties and increased expenses in complying with a variety of U.S. and foreign laws, regulations, and trade standards, including the Foreign Corrupt Practices Act and various modifications by the BIS to export policy; and ‑ different and changing legal and regulatory requirements in the jurisdictions we currently operate or may operate in the future.
Our international revenue and operations are subject to several material risks, including: - difficulties in staffing, managing and supporting operations in more than one country; ‑ difficulties in enforcing agreements and collecting receivables through foreign legal systems; ‑ fewer legal protections for intellectual property in foreign jurisdictions; ‑ foreign and U.S. taxation issues and international trade barriers, including the adoption or expansion of governmental trade tariffs, export controls, and fluctuating changes to end-use and end-user rules; ‑ difficulties in obtaining any necessary governmental authorizations for the export of our products to certain foreign jurisdictions; ‑ fluctuations in foreign economies including the impact of recessionary environments and inflation in the United States and other economies where we do business; ‑ fluctuations in the value of foreign currencies and interest rates, including the impact of recessionary environments and inflation in the United States and other economies where we do business; ‑ trade and travel restrictions; ‑ domestic and international economic or political changes, hostilities and other disruptions in regions where we currently operate or may operate in the future; ‑ difficulties and increased expenses in complying with a variety of U.S. and foreign laws, regulations, and trade standards, including modifications of the U.S. import regime, the Foreign Corrupt Practices Act and various modifications by the BIS to export policy; and ‑ different and changing legal and regulatory requirements in the jurisdictions we currently operate or may operate in the future.
Furthermore, the implementation of trade tariffs both globally and between the U.S. and China specifically carries the risk of negatively impacting China’s overall economic condition, which could negatively affect our business. Bilateral tariffs could cause a decrease in the sales of our products to customers located in China or other customers selling to Chinese end users.
Furthermore, the implementation of tariffs both globally and between the U.S. and China specifically carries the risk of negatively impacting China’s overall economic condition, which could negatively affect our business. Bilateral tariffs could cause a decrease in the sales of our products to customers located in China or other customers selling to Chinese end users.
Our operations in the U.S., China and Taiwan could be subject to significant risk of natural disasters, including earthquakes, hurricanes, typhoons, flooding and tornadoes, as well as other catastrophic events, such as epidemics, cyberattacks, terrorist attacks or wars.
Natural disasters or other catastrophic events could harm our operations. Our operations in the U.S., China and Taiwan could be subject to significant risk of natural disasters, including earthquakes, hurricanes, typhoons, flooding and tornadoes, as well as other catastrophic events, such as epidemics, cyberattacks, terrorist attacks or wars.
Our business may not generate sufficient funds, and we may otherwise be unable to maintain sufficient cash reserves, to pay amounts due under our indebtedness, including the 2026 Notes, and our cash needs may increase in the future.
Our business may not generate sufficient funds, and we may otherwise be unable to maintain sufficient cash reserves, to pay amounts due under our indebtedness, including the 2026 Notes and the 2030 Notes, and our cash needs may increase in the future.
A significant portion of our manufacturing operations are based in Ningbo, China; therefore, there could be material adverse effects on our business, financial condition, and/or cash flow if any new tariffs, legislation and/or regulations are implemented, or if existing trade agreements are renegotiated or if China or other affected countries take further retaliatory trade actions.
A significant portion of our manufacturing operations are based in Ningbo, China; therefore, there could be material adverse effects on our business, financial condition, and/or cash flow if any new tariffs, legislation, regulations, or executive orders are implemented, or if existing trade agreements are renegotiated or if China or other affected countries take further retaliatory trade actions.
Any adverse changes to these laws, regulations and legal requirements or their interpretation or enforcement could have a material adverse effect on our business. Furthermore, while China’s economy has experienced rapid growth in the past 20 years, growth has been uneven across different regions, among various economic sectors and over time.
Any adverse changes to these laws, regulations and legal requirements or their interpretation or enforcement could have a material adverse effect on our business. Furthermore, while China’s economy has experienced rapid growth in the past 30 years, growth has been uneven across different regions, among various economic sectors and over time.
Negative developments in any of these factors in China, Taiwan, or other countries could result in a reduction in demand for our products, the cancellation or delay of orders already placed, difficulties in producing and delivering our products, threats to our intellectual property, difficulty in collecting receivables, and a higher cost of doing business.
Negative developments in any of these factors in China, Taiwan, the U.S., or other countries could result in a reduction in demand for our products, the cancellation or delay of orders already placed, difficulties in producing and delivering our products, threats to our intellectual property, difficulty in collecting receivables, and a higher cost of doing business.
Despite our implementation of network security measures, our network and storage applications have been subject to computer viruses, ransomware and other forms of cyber terrorism. Also, despite our implementation of security measures, we are not able to guarantee that we can prevent unauthorized access by hackers or breaches due to operator error, malfeasance or other system disruptions.
Despite our implementation of network security measures, our network and storage applications have been subject to computer viruses, ransomware and other forms of cyber terrorism. 21 Table of Contents Also, despite our implementation of security measures, we are not able to guarantee that we can prevent unauthorized access by hackers or breaches due to operator error, malfeasance or other system disruptions.
In such cases, our business and the results of operations could be adversely affected. Our business could be negatively impacted as a result of shareholder activism. In recent years, shareholder activists have become involved in numerous public companies. Shareholder activists frequently propose to involve themselves in the governance, strategic direction, and operations of the Company.
In such cases, our business and the results of operations could be adversely affected. 19 Table of Contents Our business could be negatively impacted as a result of shareholder activism. In recent years, shareholder activists have become involved in numerous public companies. Shareholder activists frequently propose to involve themselves in the governance, strategic direction, and operations of the Company.
The rate of increase in our costs and expenses may exceed the rate of increase in our revenue, either of which would materially and adversely affect our business, our results of operations and our financial condition. 15 Table of Contents Our financial results may vary significantly from quarter-to-quarter due to a number of factors, which may lead to volatility in our stock price.
The rate of increase in our costs and expenses may exceed the rate of increase in our revenue, either of which would materially and adversely affect our business, our results of operations and our financial condition. Our financial results may vary significantly from quarter-to-quarter due to a number of factors, which may lead to volatility in our stock price.
The Company's ability to export U.S.-made products is primarily subject to the regulatory supervision of the Bureau of Industry and Security (BIS) of the U.S. Department of Commerce. Because the Company's focus on telecommunications products is a priority trade issue for BIS, the Company actively monitors licensing and export policy for our products.
The Company's ability to export U.S.-made products is primarily subject to the jurisdiction of the Bureau of Industry and Security (BIS) of the U.S. Department of Commerce. Because the Company's focus on telecommunications products is a priority trade issue for BIS, the Company actively monitors licensing and export policy for our products.
We currently derive and expect to continue to derive, a significant portion of our revenue from sales to international customers. In 2023, 2022 and 2021 , 27.7%, 18.5%, and 22.7% of our revenue, respectively, was derived from sales outside of North America. In addition, a significant portion of our manufacturing operations are based in Ningbo, China, and Taipei, Taiwan.
We currently derive and expect to continue to derive, a significant portion of our revenue from sales to international customers. In 2024, 2023 and 2022 , 18.3%, 27.7% and 18.5% of our revenue, respectively, was derived from sales outside of North America. In addition, a significant portion of our manufacturing operations are based in Ningbo, China, and Taipei, Taiwan.
A failure to evaluate and execute an acquisition appropriately or otherwise adequately address these risks may adversely affect our financial condition and results of operations. Future divestitures may adversely affect our financial condition and results of operations.
A failure to evaluate and execute an acquisition appropriately or otherwise adequately address these risks may adversely affect our financial condition and results of operations. 18 Table of Contents Future divestitures may adversely affect our financial condition and results of operations.
Additionally, a substantial portion of our property, plant and equipment, 43.0%, 42.2%, and 42.2% as of December 31, 2023, 2022 and 2021 , was located in China, respectively. We expect to make further investments in China in the foreseeable future.
Additionally, a substantial portion of our property, plant and equipment, 46.9%, 43.0% and 42.2%, as of December 31, 2024, 2023 and 2022 , was located in China, respectively. We expect to make further investments in China in the foreseeable future.
As a result, our ability to export or sell our products to certain countries and end-users could be restricted, which could adversely affect our business, financial condition, and results of operations. Furthermore, new policy priorities may lead to additional or new import risks affecting the flow of our products into the U.S.
As a result, our ability to export or sell our products to certain countries and end-users could be restricted, which could adversely affect our business, financial condition, and results of operations. New policy priorities may modify our import risks footprint affecting the flow of our products into the U.S.
We have a high fixed cost base due to our vertically integrated business model, including the fact that 1,772 of our employees as of December 31, 2023 were employed in manufacturing and research and development operations. We may not be able to adjust these fixed costs quickly to adapt to rapidly changing market conditions.
We have a high fixed cost base due to our vertically integrated business model, including the fact that 2,879 of our employees as of December 31, 2024 were employed in manufacturing and research and development operations. We may not be able to adjust these fixed costs quickly to adapt to rapidly changing market conditions.
The U.S. government has made statements and taken certain actions that have led and may lead to further changes to U.S. and international trade policies, including imposing additional tariffs on certain products manufactured in China.
The U.S. government has made statements and taken certain actions that have led and may lead to further changes to U.S. and international trade policies, including imposing additional tariffs on certain products manufactured abroad, with a specific focus on China.
Our overall gross margins have fluctuated from period to period as a result of shifts in product mix, the introduction of new products, decreases in average selling prices and our ability to reduce product costs, and these fluctuations are expected to continue in the future.
Our gross margins on individual products and among products fluctuate over each product’s life cycle. Our overall gross margins have fluctuated from period to period as a result of shifts in product mix, the introduction of new products, decreases in average selling prices and our ability to reduce product costs, and these fluctuations are expected to continue in the future.
A total of $43.3 million, $51.3 million, and $97.7 million or 19.9%, 23.0%, and 46.2%, of our revenue in the years ended December 31, 2023, 2022 and 2021 was attributable to our product manufactured at our plant in China, respectively.
A total of $111.8 million, $43.3 million and $51.3 million or 44.8%, 19.9% and 23.0% of our revenue in the years ended December 31, 2024, 2023 and 2022 was attributable to our product manufactured at our plant in China, respectively.
As of December 31, 2023 , we had approximately $114.9 million of consolidated indebtedness. We may also incur additional indebtedness to meet future financing needs.
As of December 31, 2024, we had approximately $161.2 million of consolidated indebtedness. We may also incur additional indebtedness to meet future financing needs.
As of December 31, 2023, we had U.S. accumulated net operating loss carryforwards, or NOLs, of approximately $112 million, federal and state research and development credits (“R&D credits”) of $10.9 million, business interest expense carryforwards of $26 million and foreign tax credits of $4.6 million for U.S. federal income tax purposes.
As of December 31, 202 4 , we had U.S. accumulated net operating loss carryforwards, or NOLs, of approximately $147.3 million, federal and state research and development credits (“R&D credits”) of $12.5 million, business interest expense carryforwards of $20.7 million and foreign tax credits of $4.6 million for U.S. federal income tax purposes.
Since the beginning of 2018, there has been increasing rhetoric, in some cases coupled with legislative, administrative, or executive action, from several U.S. and foreign leaders regarding the possibility of instituting tariffs on foreign imports of certain materials. Five rounds of U.S. tariffs on imports from China (respectively the “U.S.
Since the beginning of 2018, increasing rhetoric coupled with legislative, administrative, or executive action, from several U.S. and foreign leaders has led to the imposition of increased tariffs on imports of certain materials and products. Five rounds of U.S. tariffs on imports from China (respectively the “U.S.
In the ordinary course of our business, we and our data center customers maintain sensitive data on our respective networks, including intellectual property, employee personal information and proprietary or confidential business information relating to our business and that of our customers and business partners. The secure maintenance of this information is critical to our business and reputation.
Cyber threats may be generic, or they may be custom-crafted against our information systems. In the ordinary course of our business, we and our data center customers maintain sensitive data on our respective networks, including intellectual property, employee personal information and proprietary or confidential business information relating to our business and that of our customers and business partners.
Risks Related to Intellectual Property Matters If we fail to protect, or incur significant costs in defending, our intellectual property and other proprietary rights, our business and results of operations could be materially harmed. Our success depends on our ability to protect our intellectual property and other proprietary rights.
Any further changes to these laws may increase our costs and reduce our flexibility. 24 Table of Contents Risks Related to Intellectual Property Matters If we fail to protect, or incur significant costs in defending, our intellectual property and other proprietary rights, our business and results of operations could be materially harmed.
We rely on a combination of patent, trademark, copyright, trade secret and unfair competition laws, as well as license agreements and other contractual provisions, to establish and protect our intellectual property and other proprietary rights. We have applied for patents in the U.S. and in other foreign countries, some of which have been issued.
Our success depends on our ability to protect our intellectual property and other proprietary rights. We rely on a combination of patent, trademark, copyright, trade secret and unfair competition laws, as well as license agreements and other contractual provisions, to establish and protect our intellectual property and other proprietary rights.
Furthermore, the divestitures could adversely affect our ongoing business operations, including by enhancing our competitors' positions or reducing customer confidence in our ongoing brand and products.
Furthermore, the divestitures could adversely affect our ongoing business operations, including by enhancing our competitors' positions or reducing customer confidence in our ongoing brand and products. The inability to effectively and efficiently manage divestitures with the results we expect or in the timeframe we anticipate could adversely affect our financial condition and results of operations.
Any litigation, arbitration, or other administrative action could result in substantial costs and divert our management’s attention from other business concerns, which could seriously harm our business. 19 Table of Contents Risks Related to Our Indebtedness and Future Financing Our indebtedness and liabilities could limit the cash flow available for our operations, expose us to risks that could adversely affect our business, financial condition and results of operations and impair our ability to satisfy our obligations under our indebtedness.
Risks Related to Our Indebtedness and Future Financing Our indebtedness and liabilities could limit the cash flow available for our operations, expose us to risks that could adversely affect our business, financial condition and results of operations and impair our ability to satisfy our obligations under our indebtedness.
If we cannot raise required capital when needed, we may be unable to meet the demands of existing and prospective customers, adversely affecting our sales and market opportunities and consequently our business, financial condition and results of operations. 21 Table of Contents Risks Related to Data Breaches and Network Infrastructures Data breaches and cyberattacks could compromise our operations, our customers’ operations, or the operations of our contract manufacturers upon whom we rely, and cause significant damage to our business and reputation.
If we cannot raise required capital when needed, we may be unable to meet the demands of existing and prospective customers, adversely affecting our sales and market opportunities and consequently our business, financial condition and results of operations.
For each year ended 2023, 2022 and 2021 , our top ten customers represented 92.7%, 87.2%, and 84.7% of our revenue, respectively. In 2023 , Microsoft represented 46.6% of our revenue, ATX represented 15.6% of our revenue, and Digicomm represented 11.3% of our revenue.
For each year ended 2024, 2023 and 2022 , our top ten customers represented 95%, 92.7% and 87.2% of our revenue, respectively. In 2024 , Microsoft represented 43.7% of our revenue, Digicomm represented 35.1% of our revenue and Oracle represented 12.4% of our revenue.
Cyberattacks have become more prevalent and much harder to detect and defend against. Companies, including companies in our industry, have been increasingly subject to a wide variety of security incidents, cyberattacks and other attempts to gain unauthorized access to their systems or to deny access and disrupt their systems and operations.
Companies, including companies in our industry, have been increasingly subject to a wide variety of security incidents, cyberattacks and other attempts to gain unauthorized access to their systems or to deny access and disrupt their systems and operations. These threats can come from a variety of sources, ranging in sophistication from an individual hacker to a state-sponsored attack.
We also may not be able to develop the underlying core technologies necessary to create new products and enhancements, license these technologies from third parties, or remain competitive in our markets. 14 Table of Contents Our revenues, growth rates and operating results are likely to fluctuate significantly as a result of factors that are outside our control, which could adversely impact our operating results.
We also may not be able to develop the underlying core technologies necessary to create new products and enhancements, license these technologies from third parties, or remain competitive in our markets. 14 Table of Contents Adverse global economic conditions could have a negative effect on our business, results of operations and financial condition and liquidity .
In addition, we have registered certain trademarks in the U.S. We cannot guarantee that our pending applications will be approved by the applicable governmental authorities. Moreover, our existing and future patents and trademarks may not be sufficiently broad to protect our proprietary rights or may be held invalid or unenforceable in court.
Moreover, our existing and future patents and trademarks may not be sufficiently broad to protect our proprietary rights or may be held invalid or unenforceable in court.
Tariffs on Chinese Imports remain in place, and the Company faces a variety of import-related risk. Because of the political nature of many actions, it is unknown whether and to what extent new tariffs (or other new laws or regulations) will be adopted, or the effect that any such actions would have on us or our industry.
Because of the political nature of U.S. trade policy, it is unknown whether and to what extent new tariffs (or other new laws or regulations) will be adopted, the duration of any existing punitive tariffs, or the effect of U.S. trade policy on us or our industry.
Should the regulations applicable to our products change, or the restrictions applicable to countries to which we ship our products change, then the export of our products to such countries could be restricted.
Export Control Classification requirements are dependent upon an item’s technical characteristics and dictate the licensing requirements and permissible destination, end-use, end-users, and activities of the end-user. Should the regulations applicable to our products change, or the restrictions applicable to countries to which we ship our products change, then the export of our products to such countries could be restricted.
We are subject to export and import control laws, trade regulations, and other trade requirements that limit which products we sell and where and to whom we sell our products. Specifically, the BIS regulates the export of most commercial items and "dual-use" goods that may have both commercial and military applications.
Specifically, the BIS regulates the export of most commercial items and "dual-use" goods that may have both commercial and military applications. Our products are primarily classified under Export Control Classification Numbers (ECCN) 5A991, 6A995, and EAR99.
Also, any foreign NOLs (for example NOLs in our China and Taiwan jurisdictions) are subject to different NOL expirations, generally shorter than in the US. Our future results of operations may be subject to volatility as a result of exposure to fluctuations in currency exchange rates.
Also, any foreign NOLs (for example NOLs in our China and Taiwan jurisdictions) are subject to different NOL expirations, generally shorter than in the US. We have identified a material weakness in our internal control over financial reporting which may, if not remediated, result in material misstatements in our financial statement.
Tariffs on China Imports”) went into effect on July 2018, August 2018, September 2018, September 2019, and February 2020. A limited number of our products that are of Chinese origin are currently subject to U.S. Tariffs on China Imports. Despite rapid changes to U.S. import laws and applicable duties, the U.S.
Tariffs on China Imports”) went into effect on July 2018, August 2018, September 2018, September 2019, and February 2020. In 2025, following an Executive order, all Chinese-origin products became subject to additional U.S. tariffs. The Chinese government has, in turn, issued reciprocal tariffs on U.S. goods.
Removed
Increasing costs and shifts in product mix may adversely impact our gross margins. Our gross margins on individual products and among products fluctuate over each product’s life cycle.
Added
A general slowdown in the global economy or in a particular region or industry, other unfavorable changes in economic conditions, such as inflation, higher interest rates, tightening of the credit markets, recession or slowing growth, or an increase in trade tensions with U.S. trading partners could negatively impact our business, financial condition and liquidity.
Removed
The inability to effectively and efficiently manage divestitures with the results we expect or in the timeframe we anticipate could adversely affect our financial condition and results of operations. 18 Table of Contents Natural disasters or other catastrophic events could harm our operations.
Added
Adverse global economic conditions have from time to time caused or exacerbated significant slowdowns in the industries and markets in which we operate, which have adversely affected our business and results of operations. Macroeconomic weakness and uncertainty also make it more difficult for us to accurately forecast operating results, and may make it more difficult to raise or refinance debt.
Removed
Our products are primarily classified under Export Control Classification Numbers (ECCN) 5A991, 6A995, and EAR99. Export Control Classification requirements are dependent upon an item’s technical characteristics and dictate the licensing requirements and permissible destination, end-use, end-users, and activities of the end-user.
Added
An escalation of trade tensions between the U.S. and China has resulted in trade restrictions, increased protectionism and increased tariffs that harm our ability to participate in Chinese markets or compete effectively with Chinese companies.
Removed
In addition, we are currently subject to claims in an arbitration proceeding relating to the termination of the Divestiture Agreement with Yuhan Optoelectronic Technology (Shanghai) Co., Ltd., as noted in Risk Factors and Management ’ s Discussion and Analysis of Financial Condition and Results of Operations .
Added
Sustained uncertainty about, or worsening of, current global economic conditions and further escalation of trade tensions between the U.S. and its trading partners, especially China, and the decoupling of the U.S. and China economies, could result in a global economic slowdown and long-term changes to global trade.
Removed
These threats can come from a variety of sources, ranging in sophistication from an individual hacker to a state-sponsored attack. Cyber threats may be generic, or they may be custom-crafted against our information systems.
Added
Such events may also (i) cause our customers and consumers to reduce, delay or forgo technology spending, (ii) result in customers sourcing products from other suppliers not subject to such restrictions or tariffs, (iii) lead to the insolvency or consolidation of key suppliers and customers, and (iv) intensify pricing pressures.
Removed
Any further changes to these laws may increase our costs and reduce our flexibility. 24 Table of Contents Risks Related to Our Divestiture in the PRC The termination of our proposed sale of our China manufacturing facilities and claims asserted by the intended purchaser could materially adversely affect our business, financial condition, and results of operations.
Added
Any or all of these factors could negatively affect demand for our products and our business, financial condition and results of operations. Our revenues, growth rates and operating results are likely to fluctuate significantly as a result of factors that are outside our control, which could adversely impact our operating results.
Removed
On September 15, 2022, AOI and Prime World International Holdings Ltd. (the "Seller") entered into a definitive agreement (the "Purchase Agreement") with Yuhan Optoelectronic Technology (Shanghai) Co., Ltd.
Added
Changes in United States tariff and import/export regulations may have a negative effect on our business. The United States has recently enacted and proposed to enact significant new tariffs.
Removed
(the "Purchaser") pursuant to which the Seller would divest its manufacturing facilities located in the People's Republic of China and certain assets related to its transceiver business and multichannel optical sub-assembly products for the internet data center, FTTH and telecom markets.
Added
Additionally, President Trump has directed various federal agencies to further evaluate key aspects of U.S. trade policy and there has been ongoing discussion and commentary regarding potential significant changes to U.S. trade policies, treaties and tariffs.
Removed
On September 12, 2023, we delivered a notice of termination to the Purchaser to terminate the Purchase Agreement as a result of the Purchaser's failure to satisfy certain of its material obligations under the Purchase Agreement. In doing so, we also asserted the right to recover a break-up fee from the Purchaser.
Added
There continues to exist significant uncertainty about the future relationship between the U.S. and other countries with respect to such trade policies, treaties and tariffs.
Removed
On December 22, 2023, the Purchaser filed for arbitration in Hong Kong with the Hong Kong International Arbitration Centre disputing the validity of our termination notice and seeking specific performance with respect to the transaction contemplated by the Purchase Agreement, which would in any case remain subject to regulatory approvals.
Added
These developments, or the perception that any of them could occur, may have a material adverse effect on global economic conditions and the stability of global financial markets, and may significantly reduce global trade and, in particular, trade between the impacted nations and the U.S.
Removed
A hearing has not been set for the arbitration and we are not able to predict the outcome of this dispute with certainty at this time.
Added
Any of these factors could depress economic activity and restrict our access to suppliers or customers and have a material adverse effect on our business, financial condition and results of operations. 15 Table of Contents Increasing costs and shifts in product mix may adversely impact our gross margins.
Removed
However, any costs, damages or other losses we might incur in connection with the arbitration, as well as any injunction or other equitable remedy we may be subject to, could adversely affect our operations and financial conditions, divert management’s attention and seriously harm our business.
Added
Our management is responsible for establishing and maintaining adequate internal control over our financial reporting, as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934. As disclosed in Item 9A, “Controls and Procedures,” our controls and procedures were not effective as a result of a material weakness in internal controls over financial reporting.
Added
The material weakness related to an error pertaining to operation of controls over our review of technical accounting analysis.
Added
A material weakness is defined as a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.
Added
As a result of this material weakness, our management concluded that our internal control over financial reporting and related disclosure controls and procedures were not effective. We are actively engaged in developing a remediation plan designed to address this material weakness.
Added
If our remedial measures are insufficient to address the material weakness, or if additional material weaknesses or significant deficiencies in our internal control are discovered or occur in the future, our ability to record, process and report financial information accurately, and to prepare financial statements within required time periods, could be adversely affected.
Added
If we are unable to remediate the material weakness, or if we are otherwise unable to maintain effective internal control over financial reporting, our financial statements may contain material misstatements and we could be required to restate our financial results.
Added
If our financial statements are not filed on a timely basis or we are required to restate our financial results, we could be in violation of covenants contained in the agreements governing our debt and other borrowings. Our future results of operations may be subject to volatility as a result of exposure to fluctuations in currency exchange rates.
Added
The occurrence of any of these circumstances may adversely affect our financial condition and results of operation. Our ability to retain or recruit key personnel could be adversely affected by the lack of available shares under our equity incentive plan.
Added
In addition, if this lack causes us to be unable to settle outstanding awards in shares and such awards must instead be settled in cash, such cash settlement could deplete our available cash, which could have an adverse effect on our business and financial condition.
Added
The success of our business and results of operations is dependent on our executive officers and other key personnel.
Added
Beginning in 2021, in order to improve our ability to retain and recruit such persons, as well as to better align our executive compensation program with the interests of our stockholders, we implemented a long-term incentive program under our 2021 Equity Incentive Plan (the “2021 Plan”) pursuant to which we grant performance-based equity awards that vest on the achievement of specified performance goals for a specified three-year period.
Added
These performance-based awards could be earned and become payable with respect to between 0% and 200% of the target number of shares based on the Company’s achievement of preset performance goals.
Added
On June 12, 2024, the Compensation Committee certified that we exceeded the maximum performance target level for each of the performance targets set for the performance awards granted in June 2021 (the “2021 PSUs”). Therefore, executives holding such awards were entitled to payment of the 2021 PSUs at 200% of the target number of shares.
Added
On June 6, 2024, at the annual meeting of stockholders, a proposal to increase the number of shares of common stock authorized for issuance under the 2021 Plan by 2,000,000 shares was not approved, and as a result, the Company did not have sufficient shares of common stock available for issuance under the 2021 Plan to issue all of the shares payable pursuant to the 2021 PSUs.
Added
As a result, the Company settled the excess portion of the 2021 PSUs in cash, instead of in shares, resulting in reduced cash on the balance sheet and recognition of an additional $2.8 million of stock-based compensation expense for the three months ended June 30, 2024.
Added
If the Company is not able to obtain shareholder approval for additional shares of common stock under the 2021 Plan in the future that are sufficient to permit outstanding awards to be settled in shares, the Company may have to incur additional cash expenditures to settle such awards in cash in lieu of shares.
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Item 1C. Cybersecurity
Cybersecurity — threats and controls disclosure
1 edited+0 added−0 removed13 unchanged
Item 1C. Cybersecurity
Cybersecurity — threats and controls disclosure
1 edited+0 added−0 removed13 unchanged
2023 filing
2024 filing
Biggest changeOur employees participate annually in required training, including spear phishing and other awareness training. Governance Board and Management Oversight Our Board oversees our management of cybersecurity risk. They receive regular reports from management about the prevention, detection, mitigation, and remediation of cybersecurity incidents, including material security risks and information security vulnerabilities.
Biggest changeOur employees participate annually in required training, including spear phishing and other awareness training. 27 Table of Contents Governance Board and Management Oversight Our Board oversees our management of cybersecurity risk. They receive regular reports from management about the prevention, detection, mitigation, and remediation of cybersecurity incidents, including material security risks and information security vulnerabilities.
Item 2. Properties
Properties — owned and leased real estate
3 edited+2 added−1 removed4 unchanged
Item 2. Properties
Properties — owned and leased real estate
3 edited+2 added−1 removed4 unchanged
2023 filing
2024 filing
Biggest change(4) In our Taiwan location, we manufacture optical components, such as our butterfly lasers, which incorporate laser chips, subassemblies and components manufactured within our Sugar Land facility. In addition, in our Taiwan location, we manufacture transceivers for the internet data center market, telecom, FTTH and other markets.
Biggest change(4) In our Taiwan location, we manufacture optical components, such as our butterfly lasers, which incorporate laser chips, subassemblies and components manufactured within our Sugar Land facility. In addition, in our Taiwan location, we manufacture transceivers for the internet data center market, telecom, FTTH and other markets. We also manufacture CATV outdoor equipment in our Taiwan location.
(2) In our Georgia facility, we have sales and research and development for CATV market, and the lease covering the 2,932 square feet facility will expire October 31, 2024 and the lease covering the 7,527 square feet will expire December 31, 2025.
(2) In our Georgia facility, we have sales and research and development for CATV market. T he lease covering the 2,932 square feet facility will expire October 31, 2025 and the lease covering the 7,527 square feet will expire December 31, 2025.
Owned or Lease Approximate Location Expiration Date Square Footage Use Sugar Land, Texas Owned (1) 139,450 Administration, sales, manufacturing, research and development Duluth, Georgia Leased (2) 10,459 Sales, research and development Ningbo, China Owned (3) 458,849 Administration, sales, manufacturing, research and development Taipei, Taiwan May 31, 2029 (4) 268,797 Administration, sales, manufacturing, research and development (1) We manufacture laser chips (utilizing our MBE and MOCVD process), subassemblies and components in our Sugar Land, Texas facility.
Owned or Lease Approximate Location Expiration Date Square Footage Use Sugar Land, Texas Owned (1) 139,450 Administration, sales, manufacturing, research and development Duluth, Georgia Leased (2) 10,459 Sales, research and development Ningbo, China Owned (3) 458,849 Administration, sales, manufacturing, research and development Taipei, Taiwan November 30, 2039 (4) 305,459 Administration, sales, manufacturing, research and development (1) We manufacture laser chips (utilizing our MBE and MOCVD process), subassemblies and components in our Sugar Land, Texas facility.
Removed
The lease covering the Taiwan facility commenced on June 1, 2014 and expires on May 31, 2029.
Added
The lease covering the Taiwan facility commenced on June 1, 2014 and expires on May 31, 2029. On October 7, 2024, we entered into a Land and Building Lease Agreement to lease approximately 3,537 square meters of two adjoining parcels of land, in New Taipei City. The lease also includes a building on these parcels, totaling approximately 3,406 square meters.
Added
The lease term is for fifteen years, commencing on December 1, 2024, and ending on November 30, 2039.
Item 5. Market for Registrant's Common Equity
Market for Common Equity — stock, dividends, buybacks
2 edited+4 added−0 removed3 unchanged
Item 5. Market for Registrant's Common Equity
Market for Common Equity — stock, dividends, buybacks
2 edited+4 added−0 removed3 unchanged
2023 filing
2024 filing
Biggest changeAs of February 20, 2024 there were 35 holders of record of our common stock (not including beneficial holders of our common stock holding in street name). For equity compensation plan information refer to Item 12 of this Form 10-K.
Biggest changeAs of February 24, 2025, there were 54 holders of record of our common stock (not including beneficial holders of our common stock holding in street name).
In addition, the terms of our loan agreements governing our long-term debt obligations restricts us from paying dividends. Unregistered Sales of Equity Securities Not applicable. Item 6. [Reserved]
In addition, the terms of our loan agreements governing our long-term debt obligations restricts us from paying dividends. Unregistered Sales of Equity Securities Not applicable.
Added
The graph below shows the cumulative total stockholder return of an investment of $100 (and the reinvestment of any dividends thereafter) on January 1, 2019 (the last five fiscal years) in (i) our common stock, (ii) the NASDAQ Composite Index and (iii) the NASDAQ Telecommunications Index.
Added
Our stock price performance shown in the graph below is not indicative of future stock price performance.
Added
The following graph and related information is being “furnished” and shall not be deemed “soliciting material” or be deemed to be “filed” with the SEC, nor shall such information be incorporated by reference into any future filing, except to the extent that we specifically state that such graph and related information are incorporated by reference into such filing.
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Date AAOI NASDAQ Telecom NASDAQ Composite 12/31/2019 100.00 % 100.00 % 100.00 % 12/31/2020 71.63 % 122.04 % 143.64 % 12/31/2021 43.27 % 127.87 % 174.36 % 12/31/2022 15.91 % 95.61 % 116.65 % 12/31/2023 162.63 % 107.36 % 167.30 % 12/31/2024 310.27 % 119.33 % 215.22 % For equity compensation plan information refer to Item 12 of this Form 10-K.
Item 7. Management's Discussion & Analysis
Management's Discussion & Analysis (MD&A) — revenue / margin commentary
85 edited+24 added−19 removed82 unchanged
Item 7. Management's Discussion & Analysis
Management's Discussion & Analysis (MD&A) — revenue / margin commentary
85 edited+24 added−19 removed82 unchanged
2023 filing
2024 filing
Biggest changeIn 2023 , 2022 , and 2021 , ATX accounted for 15.6%, 47.3%, and 25.6% of our revenue, Digicomm accounted for 11.3%, 0%, and 0% of our revenue, and a U.S. based large CATV equipment provider accounted for 1.3%, 1.7% and 3.3% of our revenue, respectively. 28 Table of Contents In 2023 , our decrease of revenue of 2.3% over the prior-year was driven primarily by decreased demand in the CATV market, which we believe is due to reductions in purchasing of older generation DOCSIS 3.1 equipment, which was nearly offset by increased demand for our internet datacenter products, which we believe is arising from demand for products necessary for new datacenter construction along with datacenter upgrades to enable new technologies like Artificial Intelligence (AI).
Biggest changeIn 2024 , 2023 , and 2022 , Digicomm accounted for 34.1%, 11.3% and 0% of our revenue. 30 Table of Contents In 2024 , our increase of revenue of 14.6% over the prior-year was driven primarily by increased demand for our internet data center products, which we believe is arising from demand for products necessary for new data center construction along with data center upgrades to enable new technologies like AI, and the demand recovery in the CATV market, offset by the lack of revenue from Non-Recurring Engineering ("NRE") projects.
We derive a significant portion of our revenue from our top ten customers, and we anticipate that we will continue to do so for the foreseeable future.
We derive a significant portion of our revenue from our top ten customers, and we anticipate that we will continue to do so for the foreseeable future.
In designing products for our customers, we begin with the fundamental building blocks of lasers and laser components. From these foundational products, we design and manufacture a wide range of products to meet our customers’ needs and specifications, and such products differ from each other by their end market, intended use and level of integration.
In designing products for our customers, we typically begin with the fundamental building blocks of lasers and laser components. From these foundational products, we design and manufacture a wide range of products to meet our customers’ needs and specifications, and such products differ from each other by their end market, intended use and level of integration.
The Company has also agreed to reimburse the Sales Agent for certain specified expenses in connection with the registration of Shares under state blue sky laws and any filing with, and clearance of the offering by, the Financial Industry Regulatory Authority Inc., not to exceed $10,000 in the aggregate, and any associated application fees incurred.
The Company also agreed to reimburse the Sales Agent for certain specified expenses in connection with the registration of Shares under state blue sky laws and any filing with, and clearance of the offering by, the Financial Industry Regulatory Authority Inc., not to exceed $10,000 in the aggregate, and any associated application fees incurred.
However, there is no guarantee that we may increase selling prices or reduce costs to fully mitigate the effect of inflation on our costs, which may adversely impact our sales margins and profitability. 39 Table of Contents Critical Accounting Policies and Estimates Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with U.S.
However, there is no guarantee that we may increase selling prices or reduce costs to fully mitigate the effect of inflation on our costs, which may adversely impact our sales margins and profitability. 41 Table of Contents Critical Accounting Policies and Estimates Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with U.S.
Our gross margin varies quarter to quarter and varies primarily due to the product mix in a particular quarter, as well as from the level of manufacturing efficiencies, production yields (particularly in the laser chip fabrication process) and overall supply costs. 33 Table of Contents Results of Operations The following table sets forth our results of operations for the periods presented as a percentage of our revenue for those periods.
Our gross margin varies quarter to quarter and varies primarily due to the product mix in a particular quarter, as well as from the level of manufacturing efficiencies, production yields (particularly in the laser chip fabrication process) and overall supply costs. 35 Table of Contents Results of Operations The following table sets forth our results of operations for the periods presented as a percentage of our revenue for those periods.
We believe our close coordination with our customers regarding their future product requirements enhances the efficiency of our research and development expenditures. 30 Table of Contents Discussion of Financial Performance Revenue We generate revenue through the sale of our products to equipment providers for the internet data center, CATV, telecom, FTTH and other markets.
We believe our close coordination with our customers regarding their future product requirements enhances the efficiency of our research and development expenditures. 32 Table of Contents Discussion of Financial Performance Revenue We generate revenue through the sale of our products to equipment providers for the internet data center, CATV, telecom, FTTH and other markets.
We expect that our income taxes will vary in relation to our profitability and the geographic distribution of our profits. In 2023, 2022 and 2021 our effective tax rate was 0% . Our wholly owned subsidiary, Global Technology, Inc., has received preferential tax concessions in China as a national high-tech enterprise.
We expect that our income taxes will vary in relation to our profitability and the geographic distribution of our profits. In 2024, 2023 and 2022 our effective tax rate was 0% . Our wholly owned subsidiary, Global Technology, Inc., has received preferential tax concessions in China as a national high-tech enterprise.
On December 5, 2023, the Company issued approximately $80.2 million aggregate principal amount of 5.250% convertible senior notes due 2026 (the “ 2026 Notes ”), and on the same day consummated various separate, privately negotiated exchange agreements with certain holders of its 2024 Notes to exchange or repurchase approximately $80.2 million principal amount of the 2024 Notes for aggregate consideration consisting of approximately $81.1 million in cash, which included accrued interest on the 2024 Notes, and approximately 466,368 shares of the Company's common stock, par value $0.001 per share.
On December 5, 2023, the Company issued approximately $80.2 million aggregate principal amount of 5.250% convertible senior notes due 2026 (the “2026 Notes”), and on the same day consummated various separate, privately negotiated exchange agreements with certain holders of its 2024 Notes to exchange or repurchase approximately $80.2 million principal amount of the 2024 Notes for aggregate consideration consisting of approximately $81.1 million in cash, which included accrued interest on the 2024 Notes, and approximately 466,368 shares of the Company's common stock, par value $0.001 per share.
We base those internal sales upon established transfer pricing methodologies. However, we eliminate all of those internal sales, and cost of goods sold transactions, to arrive at total revenue and cost of goods sold on a consolidated basis. 31 Table of Contents We have a global set of suppliers to help balance considerations related to product availability, quality and cost.
We base those internal sales upon established transfer pricing methodologies. However, we eliminate all of those internal sales, and cost of goods sold transactions, to arrive at total revenue and cost of goods sold on a consolidated basis. 33 Table of Contents We have a global set of suppliers to help balance considerations related to product availability, quality and cost.
Research and development costs consist of R&D work orders, R&D material usage and other project related costs related to 100 Gbps, 200/400 Gbps data center products, DOCSIS 4.0 capable CATV products, including 1.8 GHz-capable amplifier products, and other new product development, and depreciation expense resulting from R&D equipment investments.
Research and development costs consist of R&D work orders, R&D material usage and other project related costs related to 100 Gbps, 200/400/800/1600 Gbps data center products, DOCSIS 4.0 capable CATV products, including 1.8 GHz-capable amplifier products, and other new product development, and depreciation expense resulting from R&D equipment investments.
We expect a similar portion of our sales to be denominated in foreign currencies in 2024. Cost of goods sold and gross margin Our cost of goods sold is impacted by variances arising from changes in yields and production volume, as well as increases or decreases in the cost of raw materials used in production.
We expect a similar portion of our sales to be denominated in foreign currencies in 2025. Cost of goods sold and gross margin Our cost of goods sold is impacted by variances arising from changes in yields and production volume, as well as increases or decreases in the cost of raw materials used in production.
In the future, we expect general and administrative expense to increase on a dollar basis but to decline as a percentage of revenue, to the extent that our revenue increases over time. 32 Table of Contents Other income (expense) Interest income consists of income earned on our cash, cash equivalents and short-term investments.
In the future, we expect general and administrative expense to increase on a dollar basis but to decline as a percentage of revenue, to the extent that our revenue increases over time. 34 Table of Contents Other income (expense) Interest income consists of income earned on our cash, cash equivalents and short-term investments.
Upon delivery of a placement notice and subject to the terms and conditions of the Agreement, sales, if any, of the Shares will be made through the Sales Agent in transactions that are deemed to be “at the market” offerings as defined in Rule 415 of the Securities Act of 1933, as amended (the "Securities Act"), including sales made through the facilities of the Nasdaq Global Market, the principal trading market for the Company’s common stock, on any other existing trading market for the Company’s common stock, to or through a market maker or as otherwise agreed by the Company and the Sales Agent.
Upon delivery of a placement notice and subject to the terms and conditions of the Agreement, sales of the Shares were made through the Sales Agent in transactions that are deemed to be “at the market” offerings as defined in Rule 415 of the Securities Act of 1933, as amended (the "Securities Act"), including sales made through the facilities of the Nasdaq Global Market, the principal trading market for the Company’s common stock, on any other existing trading market for the Company’s common stock, to or through a market maker or as otherwise agreed by the Company and the Sales Agent.
Additionally, we pay commissions to third parties on certain product lines and identified customers, which also amounted to less than one percent of our revenue in 2023, 2022 and 2021 . As such, our sales and marketing expense does not directly increase with revenue.
Additionally, we pay commissions to third parties on certain product lines and identified customers, which also amounted to less than one percent of our revenue in 2024, 2023 and 2022 . As such, our sales and marketing expense does not directly increase with revenue.
We consider the likelihood of possible outcomes in determining the best estimate for the fair value of the assets. We did not record any asset impairment charges in 2023, 2022 and 2021. Valuation of inventories Inventories are stated at the lower of cost (average-cost method) or net realizable value.
We consider the likelihood of possible outcomes in determining the best estimate for the fair value of the assets. We did not record any asset impairment charges in 2024, 2023 and 2022. Valuation of inventories Inventories are stated at the lower of cost (average-cost method) or net realizable value.
Factors that could cause or contribute to such differences include, but are not limited to, those discussed in “Risk Factors.” This section generally discusses the results of our operations for the year ended December 31, 2023 compared to the year ended December 31, 2022.
Factors that could cause or contribute to such differences include, but are not limited to, those discussed in “Risk Factors.” This section generally discusses the results of our operations for the year ended December 31, 2024, compared to the year ended December 31, 2023.
Our effective tax rate is affected by recurring items, such as tax rates in state and foreign jurisdictions and the relative amounts of income we earn in those jurisdictions. We recorded no federal tax expense for the years ended December 31, 2023 and December 31, 2022.
Our effective tax rate is affected by recurring items, such as tax rates in state and foreign jurisdictions and the relative amounts of income we earn in those jurisdictions. We recorded no federal tax expense for the years ended December 31, 2024 and December 31, 2023.
We expect continued sales of our 40 Gbps and 100 Gbps products in 2024, and we expect that sales of 400 Gbps products will likely exceed sales of 100 Gbps products later in 2024. However, quarter-to-quarter results may show considerable variability as is usual in a period of technology transition.
We expect continued sales of our 40 Gbps and 100 Gbps products in 2025, and we expect that sales of 400 Gbps products will likely exceed sales of 100 Gbps products later in 2025. However, quarter-to-quarter results may show considerable variability as is usual in a period of technology transition.
We compensate our sales staff through base salary and commissions, with base salary being the largest component of overall compensation. Total sales commissions to employees amounted to less than one percent of our revenue in 2023, 2022 and 2021 .
We compensate our sales staff through base salary and commissions, with base salary being the largest component of overall compensation. Total sales commissions to employees amounted to less than one percent of our revenue in 2024, 2023 and 2022 .
Subject to the terms and conditions of the Agreement, the Sales Agent will use its commercially reasonable efforts to sell Shares on the Company’s behalf up to the designated amount specified in the placement notice.
Subject to the terms and conditions of the Agreement, the Sales Agent would use its commercially reasonable efforts to sell Shares on the Company’s behalf up to the designated amount specified in the placement notice.
During the years ended December 31, 2023, 2022 and 2021, we recorded excess and obsolete inventory reserve charges of $8.7 million, $4.9 million, and $3.9 million, respectively. For the years December 2023, 2022 and 2021, the direct inventory write-offs related to scrap, discontinued products and damaged inventories were $10.6 million, $10.4 million, and $16.8 million, respectively.
During the years ended December 31, 2024, 2023 and 2022, we recorded excess and obsolete inventory reserve charges of $3.4 million, $8.7 million and $4.9 million, respectively. For the years ended December 31, 2024, 2023 and 2022, the direct inventory write-offs related to scrap, discontinued products and damaged inventories were $3.8 million, $10.6 million and $10.4 million, respectively.
The Company agreed to indemnify the Sales Agent against certain liabilities, including liabilities under the Securities Act, or to contribute to payments that the Sales Agent may be required to make because of any of those liabilities.
The Company agreed to indemnify the Sales Agent against certain liabilities, including liabilities under the Securities Act, or to contribute to payments that the Sales Agent could be required to make because of any of those liabilities.
In 2023, 2022 and 2021 , we had 6, 12, and 20 design wins, respectively. We define a design win as the successful completion of the evaluation stage, where our customer has tested our product, verified that our product meets substantially all of their requirements and has informed us that they intend to purchase the product from us.
In 2024, 2023 and 2022, we had 8, 6, and 12 design wins, respectively. We define a design win as the successful completion of the evaluation stage, where our customer has tested our product, verified that our product meets substantially all of their requirements and has informed us that they intend to purchase the product from us.
The details of the shares of common stock sold through the ATM Offering through December 31, 2023 are as follows (in thousands, except shares and weighted average per share price): Distribution Agent Month Weighted Average Per Share Price Number of Shares Sold Net Proceeds Compensation to Distribution Agent Raymond James & Associates, Inc.
The details of the shares of common stock sold through the First ATM Offering and the Second ATM Offering through December 31, 2024 are as follows (in thousands, except shares and weighted average per share price): Distribution Agent Month Weighted Average Per Share Price Number of Shares Sold Net Proceeds Compensation to Distribution Agent Raymond James & Associates, Inc.
Net cash used in operating activities consisted of our net loss of $56.0 million, after the exclusion of non-cash items of $42.1 million, a decrease in accounts receivable from our customers of $14.5 million and a decrease in our inventory of $6.8 million, contributing to the cash increases.
In 2023, net cash used in operating activities was $7.9 million. Net cash used in operating activities consisted of our net loss of $56.0 million, after the exclusion of non-cash items of $42.1 million, a decrease in accounts receivable from our customers of $14.5 million and a decrease in our inventory of $6.8 million, contributing to the cash increases.
For a discussion of the year ended December 31, 2022 compared to the year ended December 31, 2021, please refer to Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year ended December 31, 2022, as amended.
For a discussion of the year ended December 31, 2023 compared to the year ended December 31, 2022, please refer to Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year ended December 31, 2023.
Recent Accounting Pronouncements See Note B of our Consolidated Financial Statements for a description of recent accounting pronouncements. 40 Table of Contents
Recent Accounting Pronouncements See Note B of our Consolidated Financial Statements for a description of recent accounting pronouncements. 42 Table of Contents
As of December 31, 2023 , our cash, cash equivalents, restricted cash and short-term investments totaled $55.1 million. Cash and cash equivalents are held for working capital purposes and are invested primarily in money market or time deposit funds.
As of December 31, 2024 , our cash, cash equivalents, restricted cash and short-term investments totaled $79.1 million. Cash and cash equivalents are held for working capital purposes and are invested primarily in money market or time deposit funds.
Years ended December 31, 2023 2022 2021 Revenue, net 100.0 % 100.0 % 100.0 % Cost of goods sold 72.9 % 84.9 % 82.2 % Gross profit 27.1 % 15.1 % 17.8 % Operating expenses Research and development 16.5 % 16.3 % 19.5 % Sales and marketing 5.1 % 4.4 % 5.2 % General and administrative 24.5 % 20.9 % 20.0 % Total operating expenses 46.1 % 41.6 % 44.7 % Loss from operations (19.0 )% (26.5 )% (26.8 )% Interest and other expense, net (6.7 )% (3.3 )% 1.2 % Loss before income taxes (25.7 )% (29.8 )% (25.6 )% Income tax expense 0.0 % 0.0 % 0.0 % Net loss (25.7 )% (29.8 )% (25.6 )% Comparison of Years Ended December 31, 2023 and 2022 Revenue We generate revenue through the sale of our products to equipment providers and network operators for the internet data center, CATV, telecom, FTTH and other markets.
Years ended December 31, 2024 2023 2022 Revenue, net 100.0 % 100.0 % 100.0 % Cost of goods sold 75.2 % 72.9 % 84.9 % Gross profit 24.8 % 27.1 % 15.1 % Operating expenses Research and development 22.0 % 16.5 % 16.3 % Sales and marketing 7.3 % 5.1 % 4.4 % General and administrative 23.9 % 24.5 % 20.9 % Total operating expenses 53.2 % 46.1 % 41.6 % Loss from operations (28.4 )% (19.0 )% (26.5 )% Interest and other expense, net (46.4 )% (6.7 )% (3.3 )% Loss before income taxes (74.9 )% (25.7 )% (29.8 )% Income tax expense 0.0 % 0.0 % 0.0 % Net loss (74.9 )% (25.7 )% (29.8 )% Comparison of Years Ended December 31, 2024 and 2023 Revenue We generate revenue through the sale of our products to equipment providers and network operators for the internet data center, CATV, telecom, FTTH and other markets.
Property will be transferred from construction in progress to building and improvement at that time. Future liquidity needs We believe that our existing cash and cash equivalents, cash flows from our operating activities, and available credit will be sufficient to meet our anticipated cash needs for the next 12 months.
Property has been transferred from construction in progress to building and improvement in 2024. Future liquidity needs We believe that our existing cash and cash equivalents, cash flows from our operating activities, and available credit will be sufficient to meet our anticipated cash needs for the next 12 months.
As of December 31, 2023, construction of the building shell is complete, and approximately $27.4 million of this total cost has been paid and the remaining portion will be paid in yearly installments for three years after final inspection.
As of December 31, 2024, construction of the building shell is complete and the first floor has been used, and approximately $27.4 million of this total cost has been paid and the remaining portion will be paid in yearly installments for three years after final inspection.
In 2023, our financing activities provided $40.6 million in cash. This increase in cash was primarily due to $69.0 million of net proceeds from our ATM Offering , $76.1 million from the 2026 Notes, offset by the repayment of 2024 Notes amounting to $80.2 million and repayment of line of credit borrowings of $34.2 million.
This increase in cash was primarily due to $69.0 million of net proceeds from our ATM Offering , $76.1 million from the 2026 Notes, offset by the repayment of 2024 Notes amounting to $80.2 million and repayment of line of credit borrowings of $34.2 million. In 2022, our financing activities provided $10.8 million in cash.
We anticipate additional expenses for building improvements to the factory and we are in the process of evaluating the timing of these expenditures and obtaining bids for any such work. Based on forecasts, we believe the factory will be placed in service in the second half of 2024 after the construction is completed for the building interior.
We anticipate additional expenses for building improvements to the factory and we are in the process of evaluating the timing of these expenditures and obtaining bids for any such work. Based on forecasts, we believe the factory will be placed in full service in the year 2025 after the construction is completed for the building interior.
In the placement notice, the Company will designate the maximum number of Shares to be sold through the Sales Agent, the time period during which sales are requested to be made, the minimum price for the Shares to be sold, and any limitation on the number of Shares that may be sold in any one day.
In the placement notice, the Company would designate the maximum number of Shares to be sold through the Sales Agent, the time period during which sales were requested to be made, the minimum price for the Shares to be sold, and any limitation on the number of Shares that could be sold in any one day.
In the telecom market, we benefit from deployment of new high-speed fiber-optic networks by telecom network operators, including 5G networks. In 2023, 2022 and 2021 , our revenue was $217.6 million, $222.8 million, and $211.6 million, and our gross margin was 27.1%, 15.1%, and 17.8%, respectively.
In the telecom market, we benefit from deployment of new high-speed fiber-optic networks by telecom network operators, including 5G networks. In 2024, 2023 and 2022 , our revenue was $249.4 million, $217.6 million and $222.8 million, and our gross margin was 24.8%, 27.1% and 15.1%, respectively.
The income tax expense in the years ended December 31, 2023 and December 31, 2022 was primarily related to the state tax provision and the recording of a valuation allowance on our deferred tax assets. 36 Table of Contents Liquidity and Capital Resources As of December 31, 2023 , we had $22.5 million of unused borrowing capacity from all of our loan agreements.
The income tax expense in the years ended December 31, 2024 and December 31, 2023 was primarily related to the state tax provision and the recording of a valuation allowance on our deferred tax assets. 38 Table of Contents Liquidity and Capital Resources As of December 31, 2024 , we had $24.8 million of unused borrowing capacity from all of our loan agreements.
In China, we have a revolving line of credit with Shanghai Pudong Development Bank Co., Ltd and a credit facility with China Zheshang Bank Co., Ltd. for our China subsidiary, Global. As of December 31, 2023 , we had $22.5 million of unused borrowing capacity.
In China, we have a revolving line of credit with Shanghai Pudong Development Bank Co., Ltd and a credit facility with China Zheshang Bank Co., Ltd. for our China subsidiary, Global. As of December 31, 2024 , we had $24.8 million of unused borrowing capacity.
In the years 2023 , 2022 , and 2021 , the percentage of employees in our China factory who resigned or were terminated during Q1, relative to the average number of employees during the quarter was 53.8 %, 66.1%, and 35.9%, respectively.
In the years 2024 , 2023 , and 2022 , the percentage of employees in our China factory who resigned or were terminated during Q1, relative to the average number of employees during the quarter was 17.2%, 53.8% and 66.1%, respectively.
Similar to revenue, our gross margins can fluctuate materially depending on a variety of factors including average selling price changes, product mix, global supply chain situation, raw material cost reduction or increase, manufacturing utilization rate and changes in manufacturing efficiency.
Similar to revenue, our gross margins can fluctuate materially depending on a variety of factors including average selling price changes, product mix, global supply chain situation, raw material cost reduction or increase, manufacturing utilization rate and changes in manufacturing efficiency. We currently expect to see material revenue from 800G products in 2025.
In 2022, our financing activities provided $10.8 million in cash. This increase in cash was due to $12.2 million of net proceeds from line of credit borrowing, $5.1 million of net proceeds from bank acceptance payable and $1.2 million of net proceeds from our ATM Offering.
This increase in cash was due to $12.2 million of net proceeds from line of credit borrowing, $5.1 million of net proceeds from bank acceptance payable and $1.2 million of net proceeds from our ATM Offering.
Benefit (provision) for income taxes Years ended December 31, 2023 2022 Change (in thousands, except percentages) Benefit (provision) for income taxes $ (9 ) $ (1 ) (8 ) 800.0 % Our income tax provision consists of U.S. income tax, state taxes, and Taiwan and China income tax recorded during the periods.
Benefit (provision) for income taxes Years ended December 31, 2024 2023 Change (in thousands, except percentages) Benefit (provision) for income taxes $ (2 ) $ (9 ) 7 (77.8 )% Our income tax provision consists of U.S. income tax, state taxes, and Taiwan and China income tax recorded during the periods.
We have grown our annual revenue at a compound annual growth rate, or CAGR, of 10.7% between 2013 and 2023 . In the years ended December 31, 2023, 2022 and 2021 , we had net loss of $56.0 million, $66.4 million , and $54.2 million, respectively.
We have grown our annual revenue at a compound annual growth rate, or CAGR, of 6.7% between 2014 and 2024 . In the years ended December 31, 2024, 2023 and 2022 , we had net loss of $186.7 million, $56.0 million and $66.4 million , respectively.
On December 5, 2023, the Company issued $80.2 million of 5.250% convertible senior notes due 2026. The 2026 Notes will mature on December 15, 2026, unless earlier repurchased, redeemed or converted in accordance with their terms.
On December 5, 2023, the Company issued $80.2 million of 5.250% convertible senior notes due 2026. The 2026 Notes will mature on December 15, 2026, unless earlier repurchased, redeemed or converted in accordance with their terms. As of December 31, 2024, the outstanding principal amount remaining on the 2026 Notes is $3.5 million.
On the basis of this evaluation, as of December 31, 2023, a valuation allowance of $78.1 million has been recorded related to deferred tax assets to recognize only the portion of the deferred tax assets that are more likely than not to be realized.
On the basis of this evaluation, as of December 31, 2024, a valuation allowance of $94.8 millio n has been recorded related to deferred tax assets to recognize only the portion of the deferred tax assets that are more likely than not to be realized.
For the year ended December 31, 2023 , 19.9% of our total revenue was manufactured at our China-based subsidiary, with $3.8 million denominated in RMB and 66% of our total revenue was from products manufactured at our Taiwan-based facility, with no revenue denominated in NT dollars.
For the year ended December 31, 2024 , 44.8% of our total revenue was manufactured at our China-based subsidiary, with $0.8 million denominated in RMB and 50.8% of our total revenue was from products manufactured at our Taiwan-based facility, with no revenue denominated in NT dollars.
At December 31, 2023 and 2022 , our accumulated deficit was $265.1 million and $209.1 million, respectively. In 2023 , we earned 64.9% of our total revenue from the internet data center market and 27.5% of our total revenue from the CATV market.
At December 31, 2024 and 2023 , our accumulated deficit was $451.9 million and $265.1 million, respectively. In 2024 , we earned 59.5% of our total revenue from the internet data center market and 35.2% of our total revenue from the CATV market.
In 2023 , revenue from the internet data center market, CATV market, telecom market and FTTH markets provided 64.9%, 27.5%, 6.4%, and 0.0% of our revenue, respectively, compared to 34.6%, 53%, 11.1%, and 0.1% of our 2022 revenue, respectively.
In 2024 , revenue from the internet data center market, CATV market, telecom market, FTTH and other markets provided 59.5%, 35.2%, 4.4% and 0.9% of our revenue, respectively, compared to 64.9%, 27.5%, 6.4% and 1.2% of our 2023 revenue, respectively.
The following chart provides the revenue contribution from each of the markets we serve for the years 2023, 2022 and 2021 , as well as the corresponding percentage of our total revenue for each period (in thousands, except percentages): Years ended December 31, Market 2023 2022 2021 CATV $ 59,942 $ 118,169 $ 94,266 Data Center 141,213 77,094 97,461 Telecom 13,831 24,727 16,247 FTTH 56 129 957 Other 2,604 2,699 2,634 Total $ 217,646 $ 222,818 $ 211,565 Percentage of Revenue CATV 27.5 % 53.0 % 44.6 % Data Center 64.9 % 34.6 % 46.1 % Telecom 6.4 % 11.1 % 7.7 % FTTH 0.0 % 0.1 % 0.5 % Other 1.2 % 1.2 % 1.2 % Total Revenue 100 % 100 % 100 % In 2023, 2022 and 2021 , our top ten customers represented 92.7%, 87.2%, and 84.7% of our revenue, respectively.
The following chart provides the revenue contribution from each of the markets we serve for the years 2024, 2023 and 2022 , as well as the corresponding percentage of our total revenue for each period (in thousands, except percentages): Years ended December 31, Market 2024 2023 2022 Data Center $ 148,525 $ 141,213 $ 77,094 CATV 87,713 59,942 118,169 Telecom 10,980 13,831 24,727 FTTH 3 56 129 Other 2,144 2,604 2,699 Total $ 249,365 $ 217,646 $ 222,818 Percentage of Revenue Data Center 59.5 % 64.9 % 34.6 % CATV 35.2 % 27.5 % 53.0 % Telecom 4.4 % 6.4 % 11.1 % FTTH 0.0 % 0.0 % 0.1 % Other 0.9 % 1.2 % 1.2 % Total Revenue 100 % 100 % 100 % In 2024, 2023 and 2022 , our top ten customers represented 95.0%, 92.7% and 87.2% of our revenue, respectively.
In the years ended December 31, 2023 and 2022 , our top ten customers represented 92.7% and 87.2% of our revenue, respectively.
In the years ended December 31, 2024 and 2023 , our top ten customers represented 95.0% and 92.7% of our revenue, respectively.
In 2021, net cash used in investing activities was $10.5 million. The net cash used consisted of spending on purchase and prepaid of additional property, plant and equipment of $10.2 million. Financing activities Our financing activities have historically consisted primarily of proceeds from the issuance of common stock and arrangements with various commercial lenders.
The net cash used consisted of spending on purchase and prepaid of additional property, plant and equipment of $3.7 million and purchase of intangible assets of $0.5 million. Financing activities Our financing activities have historically consisted primarily of proceeds from the issuance of common stock and arrangements with various commercial lenders.
Based on customer forecasts and order backlog we believe that this elevated datacenter demand will likely continue into 2024. We also believe that sales in our CATV market will increase in 2024 as a result of DOCSIS 4.0 products which we plan to release in 2024.
Based on customer forecasts and order backlog we believe that this elevated data center demand will likely continue into 2025. We also believe that sales in our CATV market will increase in 2025 as a result of further adoption of our DOCSIS 4.0 products.
On March 24, 2023, we entered into an Equity Distribution Agreement (the "Agreement") with Raymond James & Associates (the "Sales Agent") pursuant to which the Company may issue and sell shares of the Company’s common stock, par value $0.001 per share (the "Shares") having an aggregate offering price of up to $35 million (the "ATM Offering"), from time to time through the Sales Agent.
On November 7, 2024, we entered into another Equity Distribution Agreement (the "Second ATM Agreement") with the Sales Agent pursuant to which the Company could issue and sell shares of the Company's common stock, par value $0.001 per share (the "Shares") having an aggregate offering price of up to $55 million (the "Second ATM Offering"), from time to time through the Sales Agent.
Also refer to Note L “Convertible Senior Notes” to the consolidated financial statements for further discussion of the 2026 Notes. 37 Table of Contents The table below sets forth selected cash flow data for the periods presented (in thousands): Years ended December 31, 2023 2022 2021 Net cash used in operating activities $ (7,929 ) $ (14,022 ) $ (11,644 ) Net cash used in investing activities (14,761 ) (3,834 ) (10,546 ) Net cash provided by financing activities 40,578 10,753 14,087 Effect of exchange rates on cash and cash equivalents 1,622 1,553 (876 ) Net increase(decrease) in cash $ 19,510 $ (5,550 ) $ (8,979 ) Operating activities In 2023, net cash used in operating activities was $7.9 million.
Also refer to Note L "Convertible Senior Notes" to the consolidated financial statements for further discussion of the 2030 Notes. 39 Table of Contents The table below sets forth selected cash flow data for the periods presented (in thousands): Years ended December 31, 2024 2023 2022 Net cash used in operating activities $ (69,526 ) $ (7,929 ) $ (14,022 ) Net cash used in investing activities (50,697 ) (14,761 ) (3,834 ) Net cash provided by financing activities 142,179 40,578 10,753 Effect of exchange rates on cash and cash equivalents 2,080 1,622 1,553 Net increase(decrease) in cash $ 24,036 $ 19,510 $ (5,550 ) Operating activities In 2024, net cash used in operating activities was $69.5 million.
Compared to other major economies in the world, China has a stable level of inflation, which has not had a significant impact on our sales or operating results.
We cannot be sure when or if prices will return to pre-pandemic levels. Compared to other major economies in the world, China has a stable level of inflation, which has not had a significant impact on our sales or operating results.
These cash decreases were offset by a decrease of notes receivable of $7.8 million, decrease in inventory of $1.2 million, increase in accounts payable to our vendors of $13.0 million and increase in accrued liability of $5.3 million. In 2021, net cash used in operating activities was $11.6 million.
These cash decreases were offset by a decrease of notes receivable of $7.8 million, decrease in inventory of $1.2 million, increase in accounts payable to our vendors of $13.0 million and increase in accrued liability of $5.3 million. Investing activities Our investing activities consisted primarily of capital expenditures and purchases of intangible assets.
We believe that diversifying our customer base is critical for our future success, since reliance on a small number of key customers makes our ability to forecast future results dependent upon the accuracy of the forecasts we receive from those key customers. 34 Table of Contents Cost of goods sold and gross margin Years ended December 31, 2023 2022 Change % of % of Amount Revenue Amount Revenue Amount % (in thousands, except percentages) Cost of goods sold $ 158,725 72.9 % $ 189,191 84.9 % $ (30,466 ) (16.1 )% Gross margin 58,921 27.1 % 33,627 15.1 % 25,294 75.2 % Cost of goods sold decreased by $30.5 million, or 16.1%, from 2022 to 2023 , primarily due to a 24% decrease from direct material costs.
We believe that diversifying our customer base is critical for our future success, since reliance on a small number of key customers makes our ability to forecast future results dependent upon the accuracy of the forecasts we receive from those key customers. 36 Table of Contents Cost of goods sold and gross margin Years ended December 31, 2024 2023 Change % of % of Amount Revenue Amount Revenue Amount % (in thousands, except percentages) Cost of goods sold $ 187,565 75.2 % $ 158,725 72.9 % $ 28,840 18.2 % Gross margin 61,800 24.8 % 58,921 27.1 % 2,879 4.9 % Cost of goods sold increased by $28.8 million, or 18.2%, from 2023 to 2024 , The cost increase in 2024 is due to the increase in direct material and direct labor cost because of revenue growth in 2024.
Nov 2023 12.572 2,068 25,473 520 Total 7,808 $ 69,057 $ 1,410 Note Offering On March 5, 2019, the Company issued $80.5 million of 5% convertible senior notes due 2024, bearing interest at a rate of 5% per year maturing on March 15, 2024 (the "2024 Notes"), unless earlier repurchased, redeemed or converted in accordance with their terms.
Note Offerings On March 5, 2019, the Company issued $80.5 million of 5% convertible senior notes due 2024, bearing interest at a rate of 5% per year maturing on March 15, 2024 (the "2024 Notes"), unless earlier repurchased, redeemed or converted in accordance with their terms.
Further information regarding our notes payable is provided in Note K Notes Payable and Long-Term Debt in the Notes to Consolidated Financial Statements in this Form 10-K. We also have a fixed-rate convertible senior note.
As of December 31, 2024, our notes payable and debt had an amount of $26.7 million, $22.4 million of which is due within 12 months. Further information regarding our notes payable is provided in Note K – Notes Payable and Long-Term Debt in the Notes to Consolidated Financial Statements in this Form 10-K. We also have fixed-rate convertible senior notes.
Historically, our revenue has been significantly concentrated within the data center market, and starting from 2021, our revenue tends to be split primarily between CATV market and data center market. Moreover, within these markets, revenue tends to be concentrated among a small number of customers.
Our revenue tends to be split primarily between CATV market and data center market. Moreover, within these markets, revenue tends to be concentrated among a small number of customers. We have taken several actions to increase the diversity of our customer base.
This factory experiences a lengthy shut-down associated with the Lunar New Year holiday which occurs in Q1 of each year. In addition to the factory shut-down, it is also common for employees in the factory to fail to return to work following resumption of operations.
In addition to the factory shut-down, it is also common for employees in the factory to fail to return to work following resumption of operations.
Based on customer forecasts and order backlog we believe that this elevated datacenter demand will likely continue into 2024. We also believe that sales in our CATV market will increase in 2024 as a result of DOCSIS 4.0 products which we plan to release in 2024.
Based on customer forecasts and order backlog we believe that this elevated data center demand will likely continue into 2025. We also believe that sales in our CATV market will increase in 2025.
Other income (expense), net Years ended December 31, 2023 2022 Change % of % of Amount revenue Amount revenue Amount % (in thousands, except percentages) Interest income $ 609 0.3 % $ 126 0.1 % $ 483 383.3 % Interest expense (9,428 ) (4.3 )% (6,319 ) (2.8 )% (3,109 ) 49.2 % Other income (expense), net (5,871 ) (2.7 )% (1,205 ) (0.5 )% (4,666 ) 387.2 % Total other income (expense), net $ (14,690 ) (6.7 )% $ (7,398 ) (3.2 )% $ (7,292 ) 98.6 % Interest income increased by $0.5 million, or 383.3% from 2022 to 2023 .
Other income (expense), net Years ended December 31, 2024 2023 Change % of % of Amount revenue Amount revenue Amount % (in thousands, except percentages) Interest income $ 874 0.4 % $ 609 0.3 % $ 265 43.5 % Interest expense (6,826 ) (2.7 )% (9,428 ) (4.3 )% 2,602 (27.6 )% Other income (expense), net (109,871 ) (44.1 )% (5,871 ) (2.7 )% (104,000 ) 1,771.4 % Total other income (expense), net $ (115,823 ) (46.4 )% $ (14,690 ) (6.7 )% $ (101,133 ) 688.4 % Interest income increased by $0.3 million, or 43.5% from 2023 to 2024 .
There can be no guarantee that we will be able to raise additional funds on terms acceptable to us, or at all. Contractual Obligations and Commitments We have outstanding notes payable with varying maturities. As of December 31, 2023, our notes payable had an amount of $23.2 million, and the entire balance is due within 12 months.
There can be no guarantee that we will be able to raise additional funds on terms acceptable to us, or at all. Contractual Obligations and Commitments We have outstanding notes payable and debt with varying maturities with various financial institutions.
The following charts provide the revenue contribution from each of the markets we served for the years ended December 31, 2023 and 2022 (in thousands, except percentages): Years ended December 31, Change % of % of 2023 Revenue 2022 Revenue Amount % CATV $ 59,942 27.5 % $ 118,169 53.0 % $ (58,227 ) (49.3 )% Data Center 141,213 64.9 % 77,094 34.6 % 64,119 83.2 % Telecom 13,831 6.4 % 24,727 11.1 % (10,896 ) (44.1 )% FTTH 56 0.0 % 129 0.1 % (73 ) (56.6 )% Other 2,604 1.2 % 2,699 1.2 % (95 ) (3.5 )% Total Revenue $ 217,646 100.0 % $ 222,818 100.0 % $ (5,172 ) (2.3 )% Revenue decreased by $5.2 million or 2.3% from 2022 to 2023.
The following charts provide the revenue contribution from each of the markets we served for the years ended December 31, 2024 and 2023 (in thousands, except percentages): Years ended December 31, Change % of % of 2024 Revenue 2023 Revenue Amount % CATV $ 87,713 35.2 % $ 59,942 27.5 % $ 27,771 46.3 % Data Center 148,525 59.5 % 141,213 64.9 % 7,312 5.2 % Telecom 10,980 4.4 % 13,831 6.4 % (2,851 ) (20.6 )% FTTH 3 0.0 % 56 0.0 % (53 ) (94.6 )% Other 2,144 0.9 % 2,604 1.2 % (460 ) (17.7 )% Total Revenue $ 249,365 100.0 % $ 217,646 100.0 % $ 31,719 14.6 % Revenue increased by $31.7 million or 14.6% from 2023 to 2024.
The decrease was driven primarily by decreased demand in the CATV market, which we believe is due to reductions in purchasing of older generation DOCSIS 3.1 equipment, which was nearly offset by increased demand for our internet datacenter products, arising from demand for products necessary for new datacenter construction along with datacenter upgrades to enable new technologies like Artificial Intelligence (AI).
The increase was driven primarily by increased demand in the CATV market, which we believe is due to market acceptance on our newly release DOCSIS 4.0 products in 2024, and increased demand for our internet data center products, arising from demand for products necessary for new data center construction along with data center upgrades to enable new technologies like AI, offset by the lack of NRE project revenue in 2024.
Operating expenses Years ended December 31, 2023 2022 Change % of % of Amount revenue Amount revenue Amount % (in thousands, except percentages) Research and development $ 35,975 16.5 % $ 36,244 16.3 % $ (269 ) (0.7 )% Sales and marketing 11,069 5.1 % 9,723 4.4 % 1,346 13.8 % General and administrative 53,226 24.5 % 46,658 20.9 % 6,568 14.1 % Total operating expenses $ 100,270 46.1 % $ 92,625 41.6 % $ 7,645 8.3 % Research and development expense Research and development expense decreased $0.27 million, or 0.7% from 2022 to 2023 .
Operating expenses Years ended December 31, 2024 2023 Change % of % of Amount revenue Amount revenue Amount % (in thousands, except percentages) Research and development $ 54,955 22.0 % $ 35,975 16.5 % $ 18,980 52.8 % Sales and marketing 18,154 7.3 % 11,069 5.1 % 7,085 64.0 % General and administrative 59,599 23.9 % 53,226 24.5 % 6,373 12.0 % Total operating expenses $ 132,708 53.2 % $ 100,270 46.1 % $ 32,438 32.4 % Research and development expense Research and development expense increased $19.0 million, or 52.8% from 2023 to 2024 .
Seasonality We are uncertain whether the demand for our internet data center, CATV, telecom and FTTH products is seasonal, as our sales data does not indicate a significant trend with respect to these products. We began to manufacture a meaningful quantity of CATV and internet data center products in our Ningbo, China factory in 2017 and 2020, respectively.
See additional information regarding income taxes in Note O, included in Part II, Item 8 of this Form 10-K. Seasonality We are uncertain whether the demand for our internet data center, CATV, telecom and FTTH products is seasonal, as our sales data does not indicate a significant trend with respect to these products.
These increases were primarily due to more sales effort for our Quantum Bandwidth™ products, offset by less commission expense in China. General and administrative expense General and administrative expense increased by $6.6 million, or 14.1%, from 2022 to 2023 . These increases were primarily due to the higher professional service fees and share-based compensation expense, offset by less depreciation expense.
General and administrative expense General and administrative expense increased by $6.4 million, or 12.0%, from 2023 to 2024 . These increases were primarily due to the higher professional service fees and share-based compensation expense.
The majority of the cash was used for CapEx spending of $14.3 million. In 2022, net cash used in investing activities was $3.8 million. The net cash used consisted of spending on purchase and prepaid of additional property, plant and equipment of $3.7 million and purchase of intangible assets of $0.5 million.
In 2024, net cash used in investing activities was $50.7 million. The majority of the cash was used for Capex spending of $50.2 million. In 2023, net cash used in investing activities was $14.8 million. The majority of the cash was used for CapEx spending of $14.3 million. In 2022, net cash used in investing activities was $3.8 million.
Further information regarding our leases is provided in Note D – Leases to Consolidated Financial Statements in this Form 10-K. Inflation The annual inflation rate in the US came down to 3.4% in 2023. Even though the inflation has slowed from the peak, it remained well above the Federal Reserve's objective of 2%.
Inflation The annual inflation rate in the US came down to 2.9% in 2024, compared with 3.4% in 2023. Even though the inflation has slowed from the peak, it remained above the Federal Reserve's objective of 2%. The annual inflation rate in Taiwan came down to 2.1% in 2024 from 2.7% in 2023 .
The Company has no obligation to sell any Shares under the Agreement and may at any time suspend offers and sales of the Shares under the Agreement. The Agreement provides that the Sales Agent will be entitled to compensation of up to 2% of the gross sales price of the Shares sold through the Sales Agent from time to time.
The Second ATM Agreement provided that the Sales Agent would be entitled to compensation of up to 2% of the gross sales price of the Shares sold through the Sales Agent from time to time.
In 2023 , 2022 , and 2021 , Microsoft accounted for 46.6%, 18.4%, and 14.1% of our revenue, a U.S. based large data center operator accounted for 8.8%, 5.9% and 8.3% of our revenue and China based manufacture accounted for 3.3%, 1.2% and 1.2% of our revenue, respectively.
In 2024 , our key customers in the internet data center market included Microsoft, Oracle and a U.S. based datacenter equipment manufacturer. In 2024 , 2023 , and 2022 , Microsoft accounted for 43.7%, 46.6%, and 18.4% of our revenue and a Oracle accounted for 12.4%, 8.8% and 5.9% of our revenue, respectively.
Furthermore, we have developed additional original design manufacturer, or ODM, relationships with customers in each of our target markets which should enable us to diversify our revenue base. We had three customers and two customers that accounted for more than 10% of our revenue in 2023 and 2022, respectively. Product Development. We invest heavily to develop new and innovative products.
These actions include hiring additional sales staff to improve our ability to serve new customers and introduction of new products that we believe will appeal to new customers. Furthermore, we have developed additional original design manufacturer, or ODM, relationships with customers in each of our target markets which should enable us to diversify our revenue base.
The majority of our research and development expense is allocated to product development, usually with a specific customer and customer platform in mind.
We had three customers that accounted for more than 10% of our revenue in 2024 and 2023, respectively. Product Development. We invest heavily to develop new and innovative products. The majority of our research and development expense is allocated to product development, usually with a specific customer and customer platform in mind.
These activities were offset by $0.3 million net repayments to acceptances payable and bank debt, and $1.0 million related to tax withholding associated with employee share-based compensation. 38 Table of Contents Loans and commitments We have lending arrangements with several financial institutions.
These activities were offset by $7.3 million debt repayment and $0.5 million related to tax withholding associated with employee share-based compensation. 40 Table of Contents Loans and commitments Currently, in the U.S., we do not have a bank loan agreement with any U.S. financial institution. However, we may explore lending opportunities in the U.S. in the future.
We believe these decreases are related to the supply chain pressure easing and decreasing commodity prices, however the labor market is still tight, and the wage pressure is still high. We cannot be sure when or if prices will return to pre-pandemic levels.
The cost of inflation was reflected in increases in shipping costs, labor rates, and in costs of some raw materials. We believe these decreases are related to the supply chain pressure easing and decreasing commodity prices, however the labor market is still tight, and the wage pressure is still high.
As of December 31, 2023, our 2026 Note had an aggregate principle amount of $80.2 million and future interest payments associated with our 2026 Notes totaled $12.6 million. Further information regarding our convertible senior notes is provided in Note L – Convertible Senior Notes in the Notes to Consolidated Financial Statements in this Form 10-K.
As of December 31, 2024, the future minimum payments required under these leases totaled $12.3 million, with $1.7 million payable within 12 months. Further information regarding our leases is provided in Note D – Leases to Consolidated Financial Statements in this Form 10-K.
On September 12, 2023, we entered into Amendment No. 1 to the Agreement with the Sales Agent, to increase the aggregate offering price from $35 million to $70 million. In November, 2023, we completed sales under the ATM Offering.
On August 6, 2024, we entered into Amendment No. 1 to the First ATM Agreement with the Sales Agent, to increase the aggregate offering price from $25 million to $60 million. On November 6, 2024, we provided notice of its termination, effective on such date, of the First ATM Agreement, as amended.
Global renewed its national high-tech enterprise certificate in 2011, 2014, 2017, 2020, and 2023 extending its three-year tax preferential status through December 2026.
Global renewed its national high-tech enterprise certificate in 2011, 2014, 2017, 2020, and 2023 extending its three-year tax preferential status through December 2026. For the years ended December 31, 2024 and 2023, we had $0.2 million each, of unrecognized tax benefits related to U.S. tax benefits recognized for which we do not meet the more likely than not threshold.
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Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Market Risk — interest-rate, FX, commodity exposure
6 edited+0 added−2 removed11 unchanged
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Market Risk — interest-rate, FX, commodity exposure
6 edited+0 added−2 removed11 unchanged
2023 filing
2024 filing
Biggest changeForeign Exchange Rates We operate on an international basis with a large portion of our business conducted in our Taiwan branch and China subsidiary. We use the U.S. dollar as our reporting currency for our consolidated financial statements.
Biggest changeAs of December 31, 2024 , we had not hedged our interest rate risk. Foreign Exchange Rates We operate on an international basis with a large portion of our business conducted in our Taiwan branch and China subsidiary. We use the U.S. dollar as our reporting currency for our consolidated financial statements.
We do not anticipate any material effect on our cash balances or investment portfolio due to fluctuations in interest rates. We could be exposed to interest rate risk, should we incur debt that had a floating interest rate. As of December 31, 2023 , all debts bore a fixed interest rate and therefore did not generate interest rate risk.
We do not anticipate any material effect on our cash balances or investment portfolio due to fluctuations in interest rates. We could be exposed to interest rate risk, should we incur debt that had a floating interest rate. As of December 31, 2024 , all debts bore a fixed interest rate and therefore did not generate interest rate risk.
During the year ended December 31, 2023 , we recognized approximately $0.7 million of exchange gain arising from foreign currency transactions and re-measurement of monetary assets and liabilities dominated in non-functional currency on the balance sheet date.
During the year ended December 31, 2024 , we recognized approximately $0.1 million of exchange gain arising from foreign currency transactions and re-measurement of monetary assets and liabilities dominated in non-functional currency on the balance sheet date.
With respect to these U.S. dollar denominated net assets as of December 31, 2023 , if exchange rates of RMB and NT dollars for U.S. dollars were 1% higher during the year ended December 31, 2023 , our other operating expenses would have been reduced by $48K.
With respect to these U.S. dollar denominated net assets as of December 31, 2024 , if exchange rates of RMB and NT dollars for U.S. dollars were 1% higher during the year ended December 31, 2024 , our other operating expenses would have been reduced by $0.1 million.
If exchange rates of RMB and NT dollars for U.S. dollars were 1% higher during the year ended December 31, 2023 , our operating expenses would have had been higher by $0.4 million. 41 Table of Contents As of December 31, 2023 , we held the U.S. dollar denominated liabilities net of assets of approximately $11.4 million in our China subsidiary and $16.2 million in our Taiwan branch.
If exchange rates of RMB and NT dollars for U.S. dollars were 1% higher during the year ended December 31, 2024 , our operating expenses would have had been lower by $0.5 million. 43 Table of Contents As of December 31, 2024 , we held the U.S. dollar denominated assets net of liabilities of approximately $12.8 million in our China subsidiary and liabilities net of assets of $27.7 million in our Taiwan branch.
During the year ended December 31, 2023 , 1.8% of our revenue was denominated in RMB and none of our revenue was denominated in NT dollars. In the year ended December 31, 2023 , 22% of our operating expenses were denominated in RMB and 16.7% of our operating expenses were denominated in NT dollars.
During the year ended December 31, 2024 , 0.3% of our revenue was denominated in RMB and none of our revenue was denominated in NT dollars. In the year ended December 31, 2024 , 22.6% of our operating expenses were denominated in RMB and 16.3% of our operating expenses were denominated in NT dollars.
Removed
As of December 31, 2023 , we had not hedged our interest rate risk. During a portion of the year ending ending December 31, 2023, we did have certain loans that bore floating interest rates.
Removed
With respect to our interest expense for the year ended December 31, 2023 an increase of 1.0% in each of our interest rates would have resulted in an increase of $0.2 million in our interest expense for such period.