0001437749-26-015620
SEC filingRevenue surged 51.4% YoY driven by data center growth, but gross margin contracted 150 bps on higher costs and inventory reserves.
For the three months ended March 31, 2026, revenue increased 51.4% YoY to $151.1 million, driven primarily by a $49.4 million surge in data center product revenues and a $2.3 million increase in CATV product revenues. Gross profit rose 43.8% to $43.9 million, but gross margin contracted 150 basis points to 29.1% from 30.6% in the prior year. The margin decline was attributed to lower production efficiency (1.1% impact from higher CapEx and depreciation) and a higher inventory reserve adjustment (0.4%). Operating expenses increased 44.1% to $56.9 million, driven by higher R&D costs (up 44.1% to $25.7 million) and general and administrative expenses (up 52.7% to $24.9 million). Net loss widened to $14.3 million from $9.2 million, reflecting the higher operating expenses and a $1.6 million negative swing in other income due to foreign exchange impacts.
Data center revenue more than doubled, rising 154.0% to $81.4 million, now representing 53.9% of total revenue (up from 32.1% a year ago). This growth was driven by stronger customer demand and increased purchases from large data center customers supporting capacity expansion and network infrastructure upgrades. CATV revenue grew modestly by 3.6% to $66.8 million, but its share of total revenue declined to 44.2% from 64.6%. Telecom and FTTH revenues declined 12.9% and 8.6%, respectively. Customer concentration remains high, with top ten customers representing 98% of revenue and Digicomm alone accounting for 44.1% of revenue and 74.5% of accounts receivable.
Management expects data center demand trends to continue for the foreseeable future, subject to customer deployment timing and supply chain conditions. Gross margin is expected to increase in future periods due to product mix, cost optimization, and production efficiencies. Capital expenditures for 2026 are expected to be materially higher than 2025, driven by facility expansion and equipment purchases for 400G, 800G, and 1.6T transceiver products, as well as Quantum Bandwidth products. The company has significant liquidity with $449.4 million in cash and equivalents and $61.7 million in unused borrowing capacity, supported by $382.6 million in net proceeds from an ATM offering completed in March 2026. Management continues to monitor tariff developments and has implemented mitigation strategies including pricing adjustments and supply chain diversification, though these may not fully offset cost increases.
As of March 31, 2026, the company held $439.7M in cash and equivalents plus $9.7M restricted cash (total $449.4M), a significant increase from $216.0M at year-end 2025, primarily driven by a $382.4M common stock offering. Total debt rose to $170.7M (current portion $41.2M, convertible senior notes $129.5M), compared to $163.8M at December 31, 2025. Inventory increased to $206.2M (up 12.6% from $183.1M), with raw materials and work-in-process driving the growth. Shareholders' equity nearly doubled to $1.1B due to the equity offering.
The filing discloses no purchase commitments (e.g., supply or capacity agreements). However, operating lease obligations are substantial, with total undiscounted lease payments of $97.3M (weighted-average remaining term 12.34 years). Recent lease agreements include a 126-month lease in Sugar Land, TX ($18.5M total payments) and a 130-month lease in Houston, TX ($19.5M total payments). There are no other material contractual obligations noted.
No share buybacks or dividends were declared. The company raised $382.4M net from a common stock offering and issued $16.3M in new line of credit borrowings while repaying $9.6M. Capital expenditures surged to $58.2M (38.5% of revenue), up from $28.4M in the prior-year period, reflecting investment in property, plant, and equipment. The company also entered into new credit facilities in China and Taiwan to support working capital.
The company operates as a single reportable segment. Revenue by manufacturing location: Taiwan $80.9M (53.5%), China $69.3M (45.9%), and United States $0.9M (0.6%). Product revenue breakdown: Data Center $81.4M (53.9%), CATV $66.8M (44.2%), Telecom $2.6M (1.7%), and Other $0.3M (0.2%). Data center revenue more than doubled YoY, while CATV remained stable.
Operating cash flow (CFO) was negative $85.4 million in Q1 FY2026, a significant deterioration from the $50.9 million cash used in the same quarter last year. Net loss widened from $9.2 million to $14.3 million, but the major driver of the cash outflow was a massive increase in working capital, particularly accounts receivable ($54.4 million use) and inventory ($25.3 million use). Depreciation and amortization of $9.2 million and share-based compensation of $4.4 million were the largest non-cash add-backs.
Capital expenditures (capex) surged to $58.2 million, up 105% year-over-year, reflecting heavy investment in property, plant, and equipment. This pushed total cash used in investing to $68.1 million. The company did not generate free cash flow (CFO minus capex) in either period; the negative FCF deepens significantly.
Financing activities provided $389.3 million, dominated by $382.4 million in net proceeds from a common stock offering. The company also drew down on lines of credit and bank acceptance payables. No share repurchases or dividends were reported. The cash burn from operations and investing was more than covered by the equity raise, resulting in a $233.3 million net increase in cash.