Welcome to the NeoPhotonics 2014 Second Quarter Conference Call. This call is being webcast live on the NeoPhotonics event calendar webpage at www.NeoPhotonics.com. This call is the property of NeoPhotonics and any recording, reproduction or transmission of this call without the express written consent of NeoPhotonics is prohibited. You may listen to a webcast replay of this call by visiting the event calendar page of the NeoPhotonics website. I would now like to turn the call over to Erica Mannion at Sapphire Investor Relations, Investor Relations for NeoPhotonics.

Good afternoon. Thank you for joining us to discuss NeoPhotonics operating results for the second quarter of 2014 as well as the company’s outlook for the third quarter. With me today are Tim Jenks, Chairman and CEO, and Ray Wallin, Chief Financial Officer. Tim will begin with a review of the second quarter results, followed by a discussion of the Company’s growth and margin drivers and cost reduction plans over the next several quarters. Ray will provide a financial update including results for the second quarter and the outlook for the third quarter of 2014. We will then open the call for questions. All material contained in the webcast is the sole property and copyright of NeoPhotonics Corporation, with all rights reserved. Certain statements in this conference call, which are not historical facts, may be considered forward-looking statements that involve risks and uncertainties. Forward-looking statements include statements regarding future business results, future levels of sales and profitability, subsequent events, product and technology development, future customer demand, inventory levels and economic and industry projections. Various factors could cause actual results to differ materially from what is set forth in such forward-looking statements. Some of the factors that could affect the Company’s results have been set forth in our press release dated August7, 2014 and will also be described in detail in the Company’s SEC filings, including but not limited to, our Annual Report on Form 10-K for the year ended December 31, 2013, which we filed on June 4, 2014, our Quarterly Report on Form 10-Q for the quarter ended March 31, 2014, which we filed on June 24, 2014,and our Quarterly Report on Form 10-Q for the quarter ended June 30, 2014, which we anticipate filing shortly. Listeners who do not have a copy of our second quarter 2014 earnings press release may obtain a copy of the press release by visiting the Company’s web site. Now, I will turn the call over to CEO, Tim Jenks.

Thank you for joining us today. We are encouraged by the strength in our business as evidenced by our record second quarter revenue of $77.5 million which came in at the high end of our outlook range of $73 to $78 million and represents a 13.6% increase over the prior quarter and a 3.3% increase over our second quarter of 2013. We witnessed increased strength in both our 100G products and their backlog, plus strong Access product shipments. In the June quarter we achieved a Non-GAAP gross margin of 20.8%. As we noted in our prior two calls we expected to have some decreases in sales for client side 100G modules and components as the industry moves from CFP to CFP2. In 2Q this resulted in adverse impact on volumes and utilization, and Ray will provide more details on this later. Our Non-GAAP EPS loss was 24 cents per diluted share. Second quarter revenue attributable to our “Speed and Agility” product group was approximately 72% of our total revenue, and was up $6.4 million from the prior quarter and up $1.8 million on a year-over-year basis. Of this, revenue from our High Speed products, i.e. 100G and some 40G, was $30.2 million or 39% of total revenue in the second quarter of 2014, which is an increase of 3% over the second quarter of 2013. Our “Access” product group was strong at approximately 21% of total revenue, which was up $2.1 million over the prior quarter and up $1.2 million on a year-over-year basis. End markets. We remain excited about the pace of 100G adoption and the dynamics in our various end-markets. 100G deployments were a significant contributor in Q2, including in China, and we are continuing to see increases in our backlog for the third and fourth quarters of…

Thank you, Tim, and good afternoon. I will start with a review of the financial results for the second quarter ended June 30, 2014 and conclude with our outlook for the third quarter of 2014. For the second quarter of 2014, revenue was $77.5 million, an increase of approximately 13.6% from the first quarter of 2014 and an increase of 3.3% from the year ago period. As Tim noted, this was within our projections and the highest second quarterly revenue in our history. We had three 10% or greater customers in the second quarter of 2014: Alcatel-Lucent at approximately 12%; compared to 13% in the first quarter; Ciena comprised approximately 13%; compared to 14% in the first quarter; and Huawei Technologies comprised approximately 39% of our total revenue compared to 35% in the first quarter. Geographically, our revenue mix for the second quarter was 20% in the Americas, which is the same as the prior quarter, 54% in China compared to 52% in the first quarter, 5% in Japan compared to 7% in the prior quarter, and 21% in the rest of the world, which is the same as the first quarter. Note that these figures are based on shipment destination and not end use destination. GAAP gross margin for the second quarter of 2014 was 18.8%, a decrease of 1.4 percentage points sequentially from the 20.2% reported for the first quarter of 2014 and a decrease of 2.0 percentage points from the second quarter of 2013. Non-GAAP gross margin for the second quarter was 20.8%, within our projection of 20% to 25%, and represents a decrease of 1.2 percentage points versus the previous quarter’s Non-GAAP gross margin of 22.0% and a decrease of 4.3 percentage points from the prior year period. The decline in gross margin from the previous…

(Operator Instructions) And Mr. Wallin, we have no questions in the queue, I'll go ahead and turn - I beg your pardon, we do have Richard Shannon with Craig-Hallum. Please go ahead.

Hi guys. I guess a couple of questions from me. Let's see here. Ray, did I catch your comments about the breakeven model after restructuring here, and breakeven $85 million in revenues?

Yes.

Okay. And based on your comments about the restructuring and the components of that, I would guess that looks like the OpEx to be around $22 million and implying a gross margin expectation on a pro forma basis about 26%. Is that roughly right?

Yes, that's pretty close.

Yeah, I think it's in the ballpark there, yeah.

Okay. How do you feel about being able to reach that in the fourth quarter from what you can see right now? It sounds like your backlog is improving for the fourth quarter. So I want to get your sense of possibilities of that happening in the fourth quarter.

Sure, Richard. This is Tim. The backlog is strong, and so I think we will continue to see strong revenue. It's not our expectation that we would be in the $85 million range though in the fourth quarter. However, I think we'll continue to move up. So as we noted there are a number of actions that we've already taken and we do expect to see the benefits accrue financially in the third quarter. But we will be continuing to work through the fourth quarter and beyond on operating changes and cost improvements. The ability to - on a sustaining basis recognizing that we do see price changes generally in the first quarter we are working on how to be well prepared for that as well.

Okay. Your comments I think in closing remarks around getting to - having profitable revenue growth the next year, are you giving a statement or a hope or a guidance or anything like that to think that you're going to be profitable on a full year basis next year? Is that your goal and will you in - additional restructuring if that's what it takes, how should we think about your [inaudible]?

I think that's an accurate interpretation, Richard, yes.

Okay, fair enough. Maybe a couple of blocking and tackling questions. What was your book-to-bill in the second quarter?

Actually, the second quarter book-to-bill was quite strong. It was in the range of - fairly close to 1.5.

1.5.

1.2, fairly close to 1.2.

Okay, fair enough. And in terms of your revenue guidance for the third quarter, can you give us a sense of what kind of a growth you are expecting from 100 gig and also from access?

For our revenue guidance, what we've seen in the last, in the period thus far, it's been relatively stable in terms of our speed and agility product, as well as our 40 and 100 gig. So I think we would expect on a percentage basis things to be in line just with the change of revenue. But on a percentage basis we would expect it to be consistent.

Okay, fair enough. I will jump out of line here guys. Thank you very much.

Thank you, Richard.

(Operator Instructions) And Mr. Wallin, with no additional questions, I'll go ahead and turn the floor back over to you, sir.

This is Tim Jenks, and in closing I would like to thank, everyone for taking time to join our call today. We look forward to updating you on our progress on our next quarterly call. Have a good day. Bye.