Aiming to become the global leader in chip-scale photonic solutions by deploying Optical Interposer technology to enable the seamless integration of electronics and photonics for a broad range of vertical market applications
Message: Oppenheimer Conference Transcript
New material from the Oppenheimer Conference. Big thanks to Rogue for his work. Mistakes are ours.
[17:10, SV] [slide 16 - Y1 $1-2M, Y2 $15-25, Y3 $90-150, Y4 $140-240, Y5 $180-300M] So we’ve provided this forecast before. So on a per unit basis SuperPhotonics has the ability to garner a fairly large market share because of the disruption in the way in which the photonics devices are packaged. And we estimate a range of revenue for the different applications, specifically 100, 200 and 400G. That is in the range of approximately $200… $200 million let’s say, between $180 and $300M, and that’s kind of our projection based on the penetration that we would expect to achieve in this space.
[17:47, SV] [slide 17] Most of what I’ve talked about I think we’ve presented before in various forums. It may be new to some of you. It may be something that others have already seen. So, I kind of want to spend just a little bit of time now on providing kind of where are we with our product introductions since the OFC in June and what can we expect going forward.
[18:16, SV] [slide 18 – 100/200G product lines] I want to discuss this along a couple of different vectors. We have... so basically we are looking at this in the context of a couple of different product lines. So there’s a 100G, 200G CWDM4 product line. So, the 100G is the legacy business that we are trying to cost reduce. 200G is new. And then we’re looking at this 100G LR4 which is a different product line. We had made an announcement back in February where we said that we finished our designs for LR4. The reason we are doing it is because of significant interest and demand in the LR4 space, which is also increasing. It also happens to be an area where there is virtually no competition. There are no competing integrated technologies available, and its kind of ripe for the kind of integration that POET provides.
[19:10, SV] So specifically on those two product lines we have now, since June… I said we had faced some delays due to the overall semiconductor ecosystem you know since the pandemic. But we’ve now assembled our receivers, transmitters and optical engines and internally validated the alpha levels of performance that we would expect to see. You can see that, on the right, that these are our complete boards that we use to validate and test our engines. So, you know, when you are selling a motor you can’t really test it without providing a test bed. Sometimes the test bed would be a prototype car. So similarly, we have to design and produce these test beds for our customers to be able to test and validate the performance of our solutions. And these test beds have to be fully software enabled. They have to have a user interface where the users can change settings. So all of that work has been done over this past quarter. So now we are in a position to categorically state that we meet the performance requirements of the market. And we’ve got about 10 customers, more than 10 customers, targeted for additional sample distribution that will occur towards the end of this month, which is largely on track in terms of our published schedules. Based on what we’ve seen with alphas there are obviously some improvements we can make as we go to beta and production. So those design updates have also been completed. And those designs are currently running in the foundries. That cycle time will probably take it through Q4, but it still meets our timelines for beta and production consistent with what has been published.
[21:06, SV] The great thing is we are going to deploy these samples concurrent with the CIOE, which is the China International Opto-electronic Expo. It’s the largest opto-electronic show in China. And we expect a fair bit of customer presence. We’ve invited all these customers to come to our booth, or to our office in Shenzhen. We are going to demonstrate all of these alphas with them, and then provide them with samples. Its always important when you’re deploying a new technology to be able to do this hand-in-glove with the customer so that there are no surprises. We show them how it works, teach them how to use the user interface, and we’ll be in a position to do that.
[21:53, SV] The exciting news on the LR4 front is since we’ve done our designs, we got wafers back, met our performance and there’s been a significant market interest. Its an extremely differentiated segment of the market with reasonably high volumes. And the unit prices are much higher in LR4 compared to CWDM by a factor of 3 or more. And we are also talking about these differentiated solutions with multiple engines inside of a module. So, that of course multiples the total revenue possibilities. Like I said, the laser and interposer performance in LR4 also now has been validated to meet our requirements. LR4 is far more stringent in its capabilities than CWDM, so we’re excited to be able to say that our platform has seamlessly provided that degree of “stretch”, if you will, in terms of supporting both of these applications. And we are in the final stages of contract with two large transceiver module suppliers. We do expect LR4 to be in production next year and with sizable revenues. So we’re pretty excited about this. It’s something that we saw—a market trend early this year. We did a quick design. We announced that quick design in February. We are now getting customer traction. And it’s moving…even though it started much later, it’s moving at the same pace as our CWDM4 product line. And so we are trying to push both of those in parallel now for our revenue plans for next year.
[20:38, SV] [slide 19] On 400G as well, we’ve made some progress. We have partnered with a company called Siluxtek, they’re based in Shanghai, for the modulator. So, 400G required a modulator. We’ve been talking to various companies, assessing their products, their capabilities, their performance of the modulators. And we’ve chosen to work with this particular company for their modulators. And we expect to do a demo of the 400G transmit that is including POET’s optical interposer plus the modulator, again at the CIOE. This is a fairly significant pull-in and development for us, because this is not something we anticipated that we could do in this timeframe, but we’ve really worked hard to get this part of our roadmap shored up. We’re kind of excited to be able to do that, and expect to be able to make an announcement, and do a demonstration of our first 400G product at the CIOE again in the course of the next months.
[24:50] So we are on schedule to have these [400G] samples in Q1 ’22. Siluxtek has changed their design to be compatible with our interposer. And they’re going through the fab process. We’re going through the fab process. And we’re trying really hard to get and insure that delivery of wafers are consistent with our requirements. But there is still tightness in the market. So, we do expect that it’s going to be plus or minus a couple of months [which] is very, very reasonable at this period of time. I think our general sense in lead times is that it is still a very, very constrained market. Our 400G receive… again, we’ve kind of put some focus and measure of priority on the transmit, and now we’re also completing our receive, which we should be able to sample as well over the course of the next month.
[25:52, SV] So, in general, I think since about June there’s just been a whirlwind of activity in POET. I think there’s been assembly work done on 100G CWDM, LR4, there’s 400G. There’s been building all these evaluation boards, our test beds. Designing all the software. Creating all the interfaces to validate performance. We’re happy with our progress, and I think that over the next month we have specifically a little more than 10 customers that are going to come, visit, take a look. We are going to be sending them home with samples. So things are looking good. I think we are on track with regards to our ability to penetrate what we believe is an exciting period in the market and in the industry. We see a lot of people wanting to adopt new technologies. They know where the market is headed. Some of them want to be able to engage in that right now at 100G, at 200G. So we’re pretty excited about where we are.
[27:00, SV] [slide 20] It’s been a lot of work, and we continue to work on our engagements. It’s always a balance. You try to focus on getting these samples and then identify through marketing, and like I said we’ve got about 3 customers that we are now finalizing project plans with. Two on LR4. And then we’ve got 10 customers lined up, especially in China, for this really large CWDM market, ready to receive samples. And I think you know [laughs] they’ll be pleased with the level of performance. We showed good performance on a single channel at the OFC. We now have equivalent or better performance on all 4 channels. And I think if you look at the questions that people have asked us over the years, “Can you do this? …” We’ve systematically checked all those boxes. And there’s always going to be improvements to be done, but I think people will keep asking questions. But as long as we keep checking those boxes I think we are poised for significant success.
[28:16, SV] [slide 21] An update on Super Photonics. Of course they are a critical outlet for our optical engines. They have hired 15 engineers and technicians, including support personnel. We moved equipment in there. There’s additional equipment we’ve brought. You can see a picture of the clean room facility at Super Photonics where the assembly is currently taking place. And we expect to be able to ramp the capability of Super Photonics over the next month to two months as we go through this. You know I think we expect starting with 10s of units initially, to 100s, and then 1000s over the course of the remaining few months of this year. So, I think we’re set up well to ramp. We’re set up well in terms of the base technology working out. And I think we are about as ready to go to in this next phase as we’ve ever been in this company since I’ve been here. I think its great, we started out a few years ago in Connecticut with a few people, and now we’ve got global operations, we’ve got production equipment lined up and ready to go. You know we’ve made a lot of progress as a team. And we’re almost there, I would say. I think when we start putting these alpha samples out, which is on track by the end of this month, we should start seeing some good traction in the market as well.
[29:23, SV] The roadmap strategically was delayed in the first half of 2021 and this continues. We don’t expect to see this alleviate for another twelve to eighteen months. Just to give you a sense of how bad it is, even raw silicon substrates are backlogged by over six months. We’ve placed orders and we don’t expect it to dramatically hurt us, but everything has to be planned six months in advance. As a small company we’re competing with… everybody else in the industry is also making orders six months in advance, so it is a challenging environment that we’ve been operating in for all of 2021. We try our best to mitigate delays. Our vendors try their best to mitigate delays, but this thing is something we have to keep our eyes on over the next twelve to eighteen months.
[31:00, SV] We are actively seeking strategic partnerships in new market segments. Particularly in health technology wearables we believe we have unique capabilities in that space, as well as unique capabilities in automotive sensing, specifically LIDAR. We continue our innovation engine going so we’ve got additional patents pending, including three provisional patents, and we just applied for what I call a seminal patent, because it is truly unique in the area of continuous wave lasers for 800G applications, for things that can do eight to sixteen channels, and it’s pretty exciting. We are very happy for that to go into the patent application pool and we look forward to continuing our development in that space.
[32:00, SV] Operationally, our headcount is at forty-two, and we would expect to end at around forty-seven this year, up from about twenty-five [one year ago]. Simultaneously, of course, Super Photonics will be hiring up to thirty people, so collectively as a team I think we’re building ourselves up for not only expanding the application space, but also being in a position to capitalize opportunities as they come up, and create new opportunities in the process as well, just like we did with LR4.
[32:36, SV] Cash: we’ve got cash on hand. And we expect additional cash to be generated through warrant conversions as we go through the rest of this year. We believe we would have sufficient cash for two years of operations, prior to significant revenue kicking in and being self-sufficient, or self-funding, at that point. So I don’t think that this [cash] is particularly an issue at this point.
[33:07, SV] An update on the NASDAQ listing: we did put a 300-million-dollar [US] registration, effective July 8th. We’ve hired a new transfer agent, moved to Computershare, and we’re applying for DTC eligibility. All of our requested information has been provided to the NASDAQ, as we go through the application process. We’ve got several investment banks with respected analysts that are showing interest in our… in sponsoring us for this dual listing in Canada and the US. And we believe we are on track to do a NASDAQ listing, depending on market conditions, in either Q4 of this year, or Q1 of next year. And of course, as we said before, while we list on the NASDAQ, we would retain our TSX listing as well.
[34:05, SV] So that’s basically what I wanted to communicate. I think we should have plenty of time for questions, I believe, so perhaps I can turn it back over to Rick and he can walk us through some Q&A?
[34:24, Rick Schafer] Yeah. Thanks Suresh. We’ve got about five minutes left so you’re correct. If it’s ok, you’ve got a couple dozen questions that have come in from investors, so I might just uh… the one that comes in the most—and I think that everybody appreciates you giving some colour around design win timing—but folks are asking for just a bit more specificity, or as much as you can provide… could we see design wins announced, you know, Q4 timeframe, or is it probably early next year? I’m kind of looking at several questions around that theme.
[34:57, SV] Yeah. You know, it’s just been so difficult. We would love to move as fast as we possibly can and in many cases we’re being gated by the counterparty, and the pace at which they move, and, the smaller the counterparty the faster they move, and the larger the counterparty the slower the processes. All I can say is the engagement is there, the dialogue is there, the discussion is there, and that there will be contracts and as soon as there are they will get announced. I think the timing is… it could be as early as a couple of weeks, it could be Q4, but I do believe we will be in a position to announce wins in that timeframe. It’s extremely reasonable for us to be able to do that. Unless something is an issue, as I said, in this climate today, and I’m sure all of you see this, even when it comes to home building, or anything mundane that you’re dealing with, in this climate today it has been difficult to get everybody together and work through issues and contracts all virtually. But we have been pleased with the progress. And I do expect very positive news in the time period I’ve mentioned.
[36:29, RS] Thanks for that colour. There are a couple of other questions along the same vein… basically, it’s obviously a very compelling story that you’re telling—and a compelling technology—but they’re asking what you see as the main barrier to your market adoption, aside from the supply constraints we just talked about… but the main barrier to market adoption for you guys?
[36:52, SV] It’s like this, guys. Any new technology that is trying to displace an incumbent, the barrier to entry is on the new technology. I have, over the past two years… you talk about the nature of the types of questions that people ask:Oh, can you this? And you kind of work through and say Yes. And the questions keep coming up. But once we demonstrate here this quad channel, 100 to 200[G], seamless migration, I think that’s going to open up some eyes, and at that point the barriers should dissolve. The barrier to entry on 100G CWDM4 is simple. There are a lot of people with established infrastructure… how are we going to be able to penetrate them, or are we going to create an alternate ecosystem with cost being a differentiator? So there are some smaller module makers, that want to compete with the big incumbent guys, who are extremely keen on tying their roadmap to POET’s interposer. So that’s the way we tackle that one.
[38:13, SV] On LR4 there is no competition. If we deliver, we are so much better off in pricing and capability that it’s ours to have, and I’m confident that we should be able to get there. Even though the specs are far more constrained and difficult, the data we’ve seen would suggest we ought to be able to get there. So there, the barrier to entry is honestly actually lower because there is no competing technology. In some of the applications we’re talking to customers about there is no solution… literally we are the only one. So as long as we deliver, and the timing is correct, we’re good there.
[35:55, SV] On 400G, we’ve been somewhat constrained because we have to partner on the modulator side, but we’re happy to now to have that part closed up and we’re executing that roadmap as well. And there we don’t believe, again, like I said, the significant barrier to entry at 400G is all about performance. So I would say the different segments are slightly different in our three product lines. CWDM4 is get enough customers excited and provide the solution that’s in a very high volume space. 400G is all about performance. And 100G LR4, honestly the market is ours to take, so we’re very thrilled about that.
[39:38, RS] Suresh, I know we’re going a little over, but if it’s ok with you maybe I’ll squeeze in one more, because it’s popped up. How are you thinking about your timeline to cash-flow breakeven? To EBIDA breakeven, even? I don’t know if Tom wants to chime in? Have you disclosed any other long-term financial goals for your long-term financial model, if we fast forward three, four, five years, I think is the question?
[40:06, SV] Yeah, perhaps Tom you can take that? We have done all of the above, but I’ll defer to Tom to answer specifically, to the extent we can (laughs).
[40:17, Tom Mika] Yeah, to the extent that we can. We’re thinking about a lot of things, so it’s hard to say. I think, fairly confidently, we believe that we can get to a self-sustaining position within a couple of years—two to three years. Along the way, though, we have a lot of opportunities to grow, both organically and inorganically, and depending on which direction we choose, that could either shorten it, or lengthen it, considerably. So we’re really focused on what’s going to happen over the next six months to twelve months. We’ve grown substantially and we expect now to be able to deliver to the joint venture, and the joint venture to expand. That’s our main focus. So, I wish I could be more specific, but we’re just not there yet.
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