Good afternoon. I will be your conference operator. At this time, I would like to welcome everyone to the Applied optoelectronics 4th Quarter and Full Year 2019 Earnings Conference Call. All participants have been placed on mute to prevent any background noise. After today's Please note this event is being recorded.
I will now turn the call over to Lindsey Severys, Investor Relations for AOI. Ms. Severys, you may begin.
Thank you. I'm Lindsey Severis, Applied Optoelectronics, investor relations. And I am pleased to welcome you to AOI's 4th Quarter and Full Year 2019 Financial Results Conference Call. After the market closed today, AOI issued a press release announcing its 4th quarter full year 2019 financial results and provided its outlook for the first quarter of 2020. The release is also available on the company's website at a0 inc.com.
This call is being the Relations section of the AOI website and will be archived for 1 year. Joining us on today's call is Doctor. Thompson Lynn, AOI's founder, Chairman and CEO and Doctor. Stefan Murray, AOI's Chief Financial Officer and Chief Strategy Officer. Thompson will give an overview of AOI's Q4 results and Stefan will provide financial details and the outlook to the first quarter of 2020.
A question answer session will follow our prepared remarks. Before we begin, I would like to remind you to review AOI's Safe Harbor statements. On today's call, management will make forward looking statements. These forward looking statements involve risks and uncertainties as well as assumptions and current expectations, which could cause company's actual results to differ materially from those anticipated in such forward looking statements. In some cases, you can identify forward looking statements by terminology such as believes, anticipates, estimates, intends, predicts, expects, plans, may, should, could, would, will, or things.
And by other similar expressions, that convey uncertainty of future events or outcomes. Forward looking statements also include statements regarding management's beliefs, and expectations related to the expansion of the reach of our products into new markets and customer responses to our innovations. As well as statements regarding the company's outlook for the first quarter of 2020. Except as required by law, we assume no obligations update forward looking statements for any reason after the date of this earnings call to conform these statements to our actual results, or to changes in the company's expectations. More information about other risks that may impact the company's business.
Are set forth in the Risk Factors section of the company's reports on file with the SEC, including the company's annual report, on Form 10 K for the year ended December 31, 2018. Also with the exception of revenue, all financial discussed today are on a non GAAP basis, unless specifically noted otherwise. Non GAAP financial measures are not intended be considered in isolation or as a substitute for results prepared in accordance with GAAP. A reconciliation between our GAAP and non GAAP measures as well as a discussion of why we present non GAAP financial measures are included in our earnings press release that is available on our website. Before moving to the financial results, I'd like to announce that AOI Management will present at the Raymond James Institutional Investor Conference on March 3rd, and we'll host an investor session at OFC on Tuesday, March 10th, at the San Diego Convention Center.
This discussion will be webcast live and a link to the webcast will be available on the Investor Relations section of the AOI website. We hope to have the opportunity to see many of you there Additionally, I'd like to note the date of our first quarter 2020 earnings call is currently scheduled for May 7, 2020. Now I would like to turn the call over to Doctor Thompson Lin, Applied Optoelectronics, Founder, chairman, and CEO. Thompson?
Thank you, Lindsey, and thank you everyone for joining us today. We delivered revenue in line with our guidance range and achieved better than expected result on the bottom line. Eeva delivered Q4 revenue of $48,700,000 non GAAP gross margin of 27.6 percent and a non GAAP net loss of $0.18 per share. During the quarter, the datacenter demand environment remained consistent with our expectations. While we are continuing to improved auto pattern among 2 of our hyperscale datacenter customers, we do remain cautiously optimistic as demand continues to stabilize among our customers.
We are pleased to report that we recently received a design win for our 400D product with the Tier 1 network equipment manufacturer. And we are encouraged by the customer interest we are seeing with this product. In CATV, the overall CATV demand environment continued to be soft, While we expect this condition to influence our performance in the near term, we believe AOI remain well positioned given our innovative technology as MSO move to next generation architectures. We continue to make good progress in diversifying our customer base. And during the quarter, we secured 9 design wins with 8 out of 9 design wins.
Coming from our new customers. We had 31 total design wins for the year, which is nearly 20% higher than our total design wins in 2018. We believe that this multi year trend of new customer design wins activity reflects favorably on our technology domain and manufacturing execution. But Eso demonstrates the ongoing success of our strategy to extend sales beyond our core hyperscale customer base. Before turning the call over to Stefan for additional details and our outlook, I would like to first address the coronavirus outbreak as a result of the COVID-nineteen outbreak in China.
We experienced change in our operation there in Q1. Our operation in Lynpo was shut down for approximately 2 a half weeks beyond our normal Lunar New Year holidays. We are currently up and running again at approximately 70% of our normal capacity, which is improving steadily as our staff is able to return to work. In order to reduce the impact of the shutdown on our customers, We have taken measures to increase production at our factory in Taiwan and in the U. S.
And while we anticipate reduced revenue and some additional expense in Q1, we are working hard to minimize these impacts. We have included our current estimates of the impact in our guidance, However, I was cautious that they are still significant unknown with respect to the extent and duration of the impact to our operation. At this point, we expect that these issues will be temporary as situation in China graduates gets back to normal. 7, will provide additional detail but I wish it had come to send our staff and leadership in China for their dedication in dealing with this lebri evolving situation. And also go out to all those individuals in China and around the world who are suffering from this unit.
We are encouraged by the traction we are seeing with our 4 energy products and the continued size of recovery from several of our data center customers. Therefore, we continue to be pleased with our design wins. We do remain focused delivered innovative technology to our customer and are well positioned to capitalize on opportunities ahead of us the market improves. We are looking forward to search, chasing our technology solution and meeting with many of you at OC next month. With that,
I will turn the call over to Stefan to review the details of our Q4 performance in outlook for Q1. Stefan? Thank you, Thompson. Our Q4 financial performance and demand environment were broadly in line with our expectations. Total revenue for the fourth quarter was $48,700,000, which was at the high end compared with percent of our data center revenue was from our 40 G transceiver products and 42% was from our 100 G products.
As Thompson mentioned, we are pleased to report a design win for our 400 G product with a Tier 1 network equipment manufacturer. Which we received subsequent to quarter end and are pleased with the interest and customer engagement that this product is generating. We remain in active qualification with other customers for their 400g data center transceiver needs and look forward to additional design wins as these activities culminate over the next few quarters. Data center market dynamics played out similarly to the last few quarters with a slight improvement in Q4 compared to Q3. We are continuing to see a modest recovery among 2 of our hyperscale data center customers, while one customer continues to purchase product from us but with reduced demand.
Looking ahead, we remain cautiously optimistic about the demand picture in the near term. We had 7 design wins in the quarter 4 out of the 7 wins coming from a new data center operator customer. We are very pleased with this new customer traction, expect to begin generating revenue from Revenue from CATV products was $6,800,000 compared to $12,700,000 in Q4 of last year. Primarily driven by weakened demand from our North American MSO customers. We continue to believe that MSOs are delaying upgrades pending the availability of new technologies such as DOCSIS 4.0.
Looking ahead, we believe this environment will continue through the first half of this year driven by demand dynamics we discussed and coupled with typical seasonality. While we believe these conditions will impact our near term outlook, we believe that AOI remains well positioned as these new technologies roll out given our key technologies like Remote PHY. Revenue from our telecom products was $2,200,000 compared to $2,800,000 in Q4 of last year, in line with our expectations. Primarily driven by a decrease in sales of certain legacy products, partially offset by increasing sales of newer products, such as those designed for 5g Network deployments. In addition to the 7 design wins in the data center segment, we had 1 design win in our telecom segment during Q4.
This design win is with a network equipment manufacturer of 5G networking equipment. For the quarter, 81% of our revenue was from data center products, 14% from CATV products, with the remaining 5% from FTTH, telecom and other. In the fourth quarter, we had 2 10% or greater customers, both in the data center market that contributed 39% 28% of total revenue, respectively. For the year, we had 4 10% or greater customers, 3 in the data center segment that contributed 32%, 24% and 11%, respectively, and 1 in the CATV market that contributed 10% total revenue. In total, for the fourth quarter, we secured 9 new design wins among 6 customers, 5 of whom are new to AOI.
Bringing our total design wins in 2019 to 31, up from 26 design wins in 2018. We made good progress this year in diversifying our revenue base 10 customers decreased from 92.9% in 2018 to 88.1% in 2019. In Q4, our top 10 customers combined to account for 87.5 percent of our revenue compared to 91.5 percent of our revenue in or last year. In Q4, we generated a gross margin of 27.6%. Up from 24.7% in Q4 of last year and within our guidance range of 26.5% to 29%.
Primarily driven by operational efficiencies and a favorable product mix. Total operating expenses in the quarter were $19,400,000 or 39.9 percent of revenue compared with $18,700,000 or 31.8 percent of revenue in the same quarter last year. We had $300,000 in direct economic incentives from the Chinese government in Q4. Operating loss in the fourth quarter was $6,000,000 compared to an operating loss of $4,200,000 in Q4 last year. GAAP net loss for Q4 was $35,400,000 compared with GAAP net loss of $8,600,000 The increased net loss was primarily driven by evaluation allowance against certain of our deferred tax assets, totaling $25,700,000.
On a non GAAP basis, net loss after tax for Q4 was $3,600,000 or a loss of $0.18 per basic share. Which was favorable to our guidance range and compares to a net loss of $500,000 or a loss of $0.02 per basic share in Q4 of last year. The basic shares outstanding used for computing net loss in Q4 were $20,100,000. Turning now to the balance sheet. We ended the 4th quarter with $67,000,000 in total cash, cash equivalents, short term investments and restricted cash.
This compares with $72,400,000 at the end of Q3 and reflects $3,200,000 in cash used for operations. As of December 31, we had $85,000,000 in inventory compared to $82,100,000 in Q3 The increase in inventory was mainly driven by inventory buildup ahead of the lunar New Year. Although this was planned, we believe this extra inventory will be useful to us as continue to recover normal operations following We made a total of $5,200,000 in capital investments in the quarter, including $2,200,000 in production equipment and machinery and $2,700,000 on construction and building improvements. Capital expenditures in 2019 of $37,600,000 were below our expectations of $46,000,000, and We expect most of these expenses to be incurred in 2020 although the timing within the year is still uncertain due to the coronavirus. As Thompson mentioned, the COVID 19 outbreak in China continues to affect our operations there, although the situation is gradually returning to normal.
Our factory in Ningbo is not located near the epicenter of the disease, but like many cities in China, the government there ordered all factories shut down for an extended period following the lunar New Year. In total, we were shut down for approximately 2.5 weeks beyond our normal holiday period. We have resumed operations there and are already operating at 70% of our normal capacity, which is improving steadily as staff are able to return to work. As far as financial impact, there are three areas that we are monitoring: 1, reduced manufacturing capacity in the quarter due to the shut down and lower than typical headcount in the factory 2, additional expenses incurred as a result of the outbreak and 3, supply chain issues. As many of our suppliers are in China, we are working closely with them as they return to work to assess whether they will be able to supply necessary raw materials for our production.
At this point, the vast majority of our suppliers and we currently believe that we will not have constraints on our production capacity in Q1 due to virus related supply chain disruption. In order to reduce the impact of The flexibility that we have in maintaining multiple manufacturing locations is an essential part of our strategy and our ability to ramp production outside of China has allowed us to offer Our production cost in Taiwan and the U. S. Are typically higher than in China, so this may also temporarily pressure margins, as China returns to full operations, we anticipate this margin pressure will be short lived. So while we have many challenges dealing with this very fluid situation, we feel that Moving now to our Q1 and non GAAP gross margin to be in the range of 23% to 25%.
Non GAAP net loss is expected to be in the range of $6,800,000 to per share, using I will turn it back over
please pickup your handset before pressing the keys. If at any time your question has been addressed, The first question comes from Samik Chatterjee of JPMorgan. Please go ahead.
Yes, hi guys. Thanks for taking my question. This is actually Bharat on for Samik. So the first question I had on the data center side, it looks like the 100 gig revenues were up sequentially quite a bit. And then if I'm not wrong, you highlighted 3 data center customers that were greater than 10%.
So that one large hyperscale customer that we had talked about in the last call that had a higher inventory and was at reduced spending levels. So are you seeing that return to normal and are you seeing normal CapEx levels return from that customer?
So just to clarify, during the quarter, we had 2 10% or greater customers in the data center segment, that were 39% 28%, respectively. So, so not 3, but 2. With respect to the we did have for the year, we had 3 data center customers just to clarify. So 2 in the fourth quarter and 3 for the year. I would say the, as we noted in our prepared remarks, 2 of our data center customers are increasing their orders and 1, continues to order from us, but with the reduced, reduced level from what it had been historically.
Okay. Yeah. Thanks for that. And then one follow-up I have is the new 400 gig design win that you talked about. How should we can you quantify probably the magnitude of that and how should we think about the benefit of that coming through?
Do you expect that meaningfully come starts to benefit the revenue the later half of this year or that's more a 2021 kind of a story? Thanks.
We may see some contribution late this year. I'm expecting it frankly, to be more of a 2021, ramp, but it could come as early as later this year depending on how things play out. This particular win is a sizable opportunity for us. But I think more than the absolute dollars that could come from this win. I think it really is a testament that the technology that we have is playing well with customers as we noted in prepared remarks, we have a number of ongoing qualifications with other customers.
And I think this provides some tangible evidence that the that the product is working as intended and customers are accepting the product and the pricing and other aspects of the that we have. So we think it demonstrates our capabilities, and we're excited about the other qualifications that we have ongoing now.
Great. Thanks for taking my question. Thank you.
The next question comes from Joe Flynn of Craig Hallum. Please go ahead.
Hi guys. I'm on for Richard Shannon. Just a quick question regarding the 400 gig products. Would you be able to tell us if it's a 4 channel or H and L product design?
It's a 4 channel design.
Okay. Thanks. And, I guess looking out forward, what's what does the like the path to breakeven look like? Anything you offer maybe like on sales levels, gross margin and maybe the main market drivers that will get you there?
Yes, I think, obviously, there's a couple of different knobs that we can turn. One is is increasing, gross margins and the other is increasing revenue. I think our operating expenses are likely to be relatively well controlled at around this level. They may on a quarter by quarter basis, they may bounce around a little bit, but overall, I don't expect major changes in our operating expenses at this point. So really it comes down to revenue increasing gross margin.
And I think as far as revenue contribution, I think the main factors that we expect to see are, improvement, especially in the back half of the year in our cable TV market. Q1 is always a seasonally down quarter for us in cable. And as we noted in our prepared remarks, we're also a kind of a nadered in terms of industry revenue, I believe, at least from the commentary that I've heard from other companies in the industry so far this reporting season, it seems like, you know, revenues are generally depressed across the cable TV space. We do believe that, several MSOs are in the process of contemplating or making plans begin to upgrades later on in the year. And that should be good for the industry as a whole and hopefully AOI in particular, participating in that.
We do think some of our newer technologies like Remote PHY, and some of our other newer products for the cable space could contribute positively to both obviously revenue and gross margins as well. So that's one factor. I think that could lead us improving conditions. The other is continued growth in our 100 gig data center products. As you noted, our 100 gig I'm sorry, it wasn't you.
It was a previous question noted that the 100 gig was up sharply. It was nearly double what it was last quarter. And as long as that trend can continue, I think that's positive, for us, it portends revenue growth as well. 400 gig, as I noted in my answer to the previous question, is likely to be not that big a contributor in 2020. But longer term could meaningfully contribute to to both revenue and gross margin.
And then the 5G network build out, current I think with the coronavirus, that does put a little bit of a question mark on the pace of rollouts, particularly in China, where some of the early rollouts were expected to happen. But nevertheless, I think over the longer term, as we move past the virus related concerns, that certainly should be positive for us in terms of revenue growth. We also think it could be positive in terms of gross margin. It depends a little bit on product mix there, but But there's opportunities where we can extract higher gross margin, certainly than our current levels there. So those are all the kind of knobs that we expect to turn and the dynamics that are playing out.
And overall, I think we're pretty optimistic that, data center recovery is underway. Cable TV is still not recovering yet, but I think there's reason to be optimistic about the back half of the year. And then 5G should be a contributor to us as well. All three of those things are kind of pointing in the right direction, if not immediately evident in this quarter.
All right. Thanks. That's all for me.
At this time, we have no further questions. And I will turn the call over to Doctor Thompson Lynn for closing remarks.
Okay. And thank you for joining us today. As always, thank you to our investors. Customers and employees for your continued support, and we look forward to see many of you at our upcoming investor conference at OC.
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.