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New words:
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Financial report summary
?Competition
Sumitomo Electric Industries • Coherent • CIENA • Finisar • INPHI • Neophotonics • LumentumRisks
- The Merger could divert management’s attention, disrupt our relationships with third parties and employees and result in negative publicity or legal proceedings, any of which could negatively impact our operating results and ongoing business.
- The extent to which the novel coronavirus SARS-CoV-2, referred to as the COVID-19 pandemic, or COVID-19, has adversely affected, and may continue to adversely affect, our business, results of operations and financial condition, or the business and financial condition of our customers and suppliers, is uncertain.
- We depend on a limited number of customers for a significant percentage of our revenue and the loss or temporary loss of a major customer for any reason could harm our financial condition.
- The future success of our business is substantially dependent on our successful development and release of new products.
- The failure to increase sales of our products to our customers and expand our customer base as anticipated could adversely affect our future revenue and business.
- Product quality problems, defects, errors or vulnerabilities in our products could harm our reputation and adversely affect our business, financial condition, results of operations and prospects.
- Quality control problems in manufacturing could result in delays in product shipments to customers or in quality problems with our products which could adversely affect our business.
- If we fail to accurately predict market requirements or market demand for our products, our business, competitive position and operating results will suffer.
- Negative economic conditions created or exacerbated by the ongoing COVID-19 pandemic could adversely impact our business in various respects.
- We may not be able to maintain or improve our gross margins.
- We generate a significant portion of our revenue from international sales and rely on foreign manufacturers to make our products, and therefore are subject to additional risks associated with our international operations.
- Changes in U.S. trade policies could disrupt global supply, manufacturing and customer relationships, which may materially increase costs of components contained in our products, increase our manufacturing costs and make our products more expensive or unavailable in foreign markets.
- We are subject to government regulation, including import, export, economic sanctions, privacy, and anti-corruption laws and regulations that may limit our sales opportunities, expose us to liability and increase our costs.
- The markets in which we operate are highly competitive.
- Our sales cycles can be long and unpredictable, and our sales efforts require considerable effort and expense. As a result, our sales and revenue are difficult to predict and may vary substantially from period to period, which may cause our results of operations to fluctuate significantly.
- The industry in which we operate is volatile and subject to significant cyclicality.
- If we fail to attract, retain and motivate key personnel, or if any of our key personnel become ill, are required to self-quarantine or otherwise become unwilling or unable to perform their duties as a result of the COVID-19 pandemic, our business could suffer.
- Customer requirements for new products, as well as specifications established by industry groups and standards bodies, are increasingly challenging, which could lead to significant executional risk in designing such products or make our products obsolete. We may incur significant expenses long before we can recognize revenue from new products, if at all, due to the costs and length of research, development and manufacturing process cycles.
- We depend on third parties for a significant portion of the fabrication, assembly and testing of our products.
- We depend on a limited number of suppliers, some of which are sole sources, and our business could be disrupted if they are unable to meet our needs.
- We may not be able to manufacture our products in volumes or at times sufficient to meet customer demands, which could result in delayed or lost revenue and harm to our reputation.
- If our customers do not qualify our manufacturing lines or the manufacturing lines of our subcontractors for volume shipments, our operating results could suffer.
- Our results of operations may suffer if we do not effectively manage our inventory, and we may continue to incur inventory-related charges.
- Our revenue growth rate in prior periods is not likely to be indicative of our future growth or performance.
- We may not be able to successfully manage our business if we are unable to maintain our internal systems, processes and controls.
- If we do not effectively expand and train our direct sales force, we may be unable to add new customers or increase sales to our existing customers, and our business will be adversely affected.
- Most of our long-term customer contracts do not commit customers to specified purchase commitments, and our customers may decrease, cancel or delay their purchases at any time with little or no advance notice to us.
- We may face product liability and other types of claims, which could be expensive and time consuming and result in substantial damages to us and increases in our insurance rates.
- Our business and operating results may be adversely affected by natural disasters, major public health issues, including the ongoing COVID-19 pandemic, or other catastrophic events beyond our control.
- Breaches, failures or interruptions of our cybersecurity systems could degrade our ability to conduct our business operations and deliver products to our customers, compromise the integrity of the software embedded in our products, result in significant data losses and the theft of our intellectual property, damage our reputation, expose us to liability to third parties and require us to incur significant additional costs to maintain the security of our networks and data.
- We are subject to environmental, health and safety laws and regulations, which could subject us to liabilities, increase our costs or restrict our business or operations in the future.
- If we do not achieve the anticipated financial, operational and effective tax rate efficiencies expected from our corporate tax structure, our financial condition and results of operations could be adversely affected.
- The final determination of our income tax liability may be materially different from our income tax provision.
- Our ability to utilize certain net operating loss carryforwards and tax credit carryforwards may be limited under Sections 382 and 383 of the Internal Revenue Code.
- We are a multinational organization faced with increasingly complex tax issues in many jurisdictions, and we could be obligated to pay additional taxes in various jurisdictions, including in the United States.
- We are exposed to credit risk and fluctuations in the market values of our investment portfolio.
- Our stock price has been volatile and investors in our common stock may be unable to sell their shares at or above the price at which they were purchased.
- Our quarterly operating results or other operating metrics have fluctuated significantly, and they are likely to continue to do so.
- Our intellectual property rights are valuable, and any inability to protect them could reduce the value of our products, services and brand.
- We may be subject to intellectual property litigation that could divert our resources.
- Confidentiality arrangements with employees and others may not adequately prevent disclosure of trade secrets and other proprietary information.
- We may be subject to damages resulting from claims that our employees or contractors have wrongfully used or disclosed alleged trade secrets of their former employees or other parties.
- We license technology from third parties, and our inability to maintain those licenses could harm our business.
- The use of open source software in our offerings may expose us to additional risks and harm our intellectual property.
Management Discussion
- Revenue increased by $118.8 million, or 26%, to $583.5 million in the year ended December 31, 2020 from $464.7 million in the year ended December 31, 2019. The increase was primarily due to a $135.5 million increase in sales of our embedded modules and an $8.7 million increase in sales of our pluggable modules, partially offset by a $25.4 million decrease in sales of our semiconductors. In the years ended December 31, 2020 and 2019, we derived 23% and 34%, respectively, of our revenue from sales to customers with ship-to locations in China.
- Cost of revenue increased $55.4 million, or 23%, to $299.4 million in the year ended December 31, 2020 from $244.0 million in the year ended December 31, 2019. The increase was mainly due to increased sales volumes.
- Our gross profit percentage increased to 48.7% in the year ended December 31, 2020 compared to 47.5% in the year ended December 31, 2019. The increase in gross profit percentage was primarily due to the favorable impact of semi-fixed costs relative to the current period revenue volume, partially offset by an unfavorable impact of product mix.